Fewer apply for mortgages

Measure of loan demand dropped 4% last week

July 25, 2004

An index of mortgage applications in the United States fell for a second week as fewer Americans filed for loans to purchase homes. Refinancing also declined.

The Mortgage Bankers Association's measure of loan demand dropped 4 percent last week to 617.9. The purchase index, which reached a record in January, declined 6.1 percent to 440.3.

Many experts expect a slowdown in sales as pent-up demand wanes and borrowing costs rise along with the Federal Reserve's benchmark interest rate. Housing starts last month fell to a one-year low, according to a a government report released Tuesday.

"We do not expect the falloff will be abrupt or significant" for home construction, Fed Chairman Alan Greenspan told lawmakers Tuesday. "Although mortgage rates are up from recent lows, they remain quite attractive from a longer-run perspective and are providing solid support to home sales."

The measure of applications to refinance loans fell 0.7 percent to 1,651.1.

"Things were a little quiet around the Fourth of July weekend but have since picked up," said Bob Moulton, president of Americana Mortgage Group Inc. "Our clients watch the rates. If they missed the window to refinance late last year or early this year, they are the ones going back now."

Higher rates might bring in more customers as home prices fall, Moulton said. More homebuyers are showing interest in float-down mortgages, which are fixed at a certain rate unless rates go down before settlement, he said.

Greenspan also said economic expansion "has become more broad-based" and that the central bank can continue to raise interest rates at a "measured" pace.

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