WASHINGTON -- The number of mortgage applications fell to the lowest level in nearly a year, according to an index by the Mortgage Bankers Association.
The association's index of applications fell 4 percent in the week that ended Dec. 16 to 594.6, from 619.3 the previous week. It was the lowest level since the first week in January. The group's purchase index fell 5.2 percent to 453.1 from 477.9 the week before.
Higher home prices and mortgage rates have made homes less affordable, while less refinancing removes a source of cash for consumers. An improving labor market may help cushion the effect of higher costs, allowing sales to slow gradually in 2006 from a record this year, economists said.
"While we expect higher mortgage rates and a slackening in demand to cool activity in 2006, we do not anticipate a collapse in housing demand," Joseph Abate, a senior economist at Lehman Brothers Inc. in New York, said before the report.
The Mortgage Bankers Association's refinancing index fell 1.6 percent to 1,418.1 from 1,441.8, about half its 2005 high reached in June.
The National Association of Realtors predicted sales of existing homes would cool to 6.84 million in 2006 from 7.1 million this year, which would be a record.