Mortgage applications decline as home buys hit 6-week low

February 27, 2005|By BLOOMBERG NEWS

Mortgage applications fell for a second week, led by a decline in home purchases, as the rate for 30-year fixed mortgages rose the most in nine months, an industry report showed.

The Washington-based Mortgage Bankers Association said its gauge of mortgage applications declined 0.6 percent to 727.9 for the week ended Feb. 18 from the previous week's 732.3. Home purchase applications dropped 1.3 percent to 417.8, the lowest in six weeks.

"Home sales should continue to moderate in coming months," said Sheryl King, a senior economist at Merrill Lynch & Co. in New York, in a note to clients before the report. "Housing will transition from a high-growth story in 2004 to a high-level story in 2005."

Total home sales this year might slow to 7.652 million, compared with 7.858 million in 2004, and 30-year mortgage rates might rise to an average 6 percent from 5.8 percent in 2004, according to a forecast by the National Association of Realtors. A cooler housing market might contribute to an expected slowdown in growth. The group expects the economy will grow 3.9 percent in 2005 after expanding 4.4 percent last year.

Refinancing applications continued to climb, rising 0.1 percent in the week to 2532.0 from 2530.1, according to the Mortgage Bankers Association. The level is the highest since April last year, and the increase was the fourth-straight.

Adjustable-rate mortgages accounted for 30.7 percent of all applications for the week ended Feb. 18, the same as the previous week. In May last year, before the Federal Reserve began raising rates, they were about 34 percent.

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