Mortgage application index falls nearly 8%

October 30, 2005|By BLOOMBERG NEWS

WASHINGTON -- Mortgage applications fell to the lowest level since April, reflecting fewer home purchases and less refinancing, a survey shows.

The Mortgage Bankers Association's index of applications declined 7.9 percent to 679.1 in the week that ended Oct. 21, the fourth decline in five weeks. The index stood at 737.5 the previous week. The association's measure of home purchases dropped 7.4 percent, the biggest decline since June, and mortgage refinancing fell 8.5 percent.

The average rate on a 30-year mortgage stayed above 6 percent for a second straight week. Higher borrowing costs are forecast to slow housing in 2006 after a record this year, according to the National Association of Realtors.

"Home buying has stabilized in the last three months, as interest rates have moved up," said Wesley Beal, chief economist at IDEAglobal.com in New York. "Most of the people who could have benefited from refinancing have already done so, so that has slowed to a trickle."

The purchase index fell to 466.4 in the week ending Oct. 21 from 503.9 the previous week. The refinance index decreased to 1,916.8 from 2,095.7. Refinancing accounted for 42.5 percent of all mortgage applications, compared with 42.8 percent the previous week and 45.6 percent a year ago.

Adjustable-rate mortgages claimed a larger share, rising to 29.5 percent from 29.3 percent. Interest-only loans, which generally carry adjustable rates, grew to 23 percent of new mortgages in the first half of the year from 17 percent a year ago, as homebuyers seek new ways to make home purchases affordable, according to a separate report by the bankers group.

"Borrowers taking interest-only mortgages will decrease their payment by 20 percent versus a fixed-rate mortgage," said Robert Moulton, president of the Americana Mortgage Group, in an interview in New York.

Mortgage rates have been rising since the end of August as Federal Reserve policymakers keep to their "measured" pace of interest-rate increases. Central bankers have raised their overnight bank lending rate by a quarter point at each of their last 11 meetings and are forecast to boost it to 4 percent Tuesday.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.