Mortgage applications fall, as fewer refinance loans

September 05, 2004|By BLOOMBERG NEWS

U.S. mortgage applications fell 0.6 percent last week, as fewer homeowners refinanced existing loans, a private group's report showed.

The Washington-based Mortgage Bankers Association's gauge declined to 642.7 from 646.3 the week before. The group's refinancing index dropped 1.1 percent to 1,804.1 from 1,824.9.

Refinancing last year was a source of cash for consumers and helped underpin the economy. The group's measure of applications to purchase homes fell 0.1 percent to 443.1, holding above the average this year. The gauge reached an all-time high of 501.6 in January.

"We don't have much going on in refinancing activity," Michael Moran, chief economist at Daiwa Securities America Inc. said. "There's a bit of a rush to get into the housing market" before interest rates rise again.

Applications to refinance loans accounted for 40.7 percent of all mortgage business, compared with 40.4 percent a week earlier. The percentage of applications for adjustable-rate mortgages rose to 33.1 percent from 32.1 percent.

Loan production at H&R Block Inc.'s mortgage business rose 28.4 percent in its fiscal first quarter, the company said last week, helped by more applications and a rise in the average loan size. The largest U.S. tax-preparation firm said it expects more growth this year even as higher interest rates cut into profit margins for the mortgage business.

"Our mortgage business is on track to meet our expectations for the year," H&R Block Chief Executive Officer Mark Ernst said in a statement.

Surging demand and tight supplies have boosted home prices, raising concern among some economists that homes may become unaffordable for some people. The median home price in July rose to a record $191,300, according to the National Association of Realtors.

The median price for a previously owned single-family house will rise 6.1 percent this year, Fannie Mae, the biggest U.S. mortgage financier, forecast this month. In July, the Washington-based company estimated a 5.3 percent gain.

New-home sales fell 6.4 percent in July to a 1.134 million annual rate, the slowest this year, Commerce Department figures showed last month. Sales of previously owned homes fell 2.9 percent last month, the National Association of Realtors said.

The mortgage bankers survey covers about 50 percent of all retail residential mortgage originations and has been conducted weekly since 1990. The base period is March 16, 1990, when the value for all indexes was 100.

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