US mortgage applications plunged last week, largely reflecting a drop in demand for home refinancing loans, an industry group said Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended March 28 fell 28.7 percent to 688.3.
The index, however, gained 48.1 percent the previous week.
Overall mortgage applications last week were 6.0 percent above their year-ago level. The four-week moving average of mortgage applications, which smoothes the volatile weekly figures, was up 0.11 percent to 744.5.
The U.S. housing market is currently suffering one of the worst downturns in its history. Last week's drop in demand may indicate what is in store for the hard-hit sector this spring, which is the peak home-buying season.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 5.75 percent, up 0.01 percentage point from the previous week.
Interest rates were below year-ago levels of 6.13 percent.
Fixed 15-year mortgage rates averaged 5.27 percent, up from 5.23 percent the previous week. Rates on one-year adjustable-rate mortgages (ARMs) decreased to 7.00 percent from 7.02 percent.
The MBA's seasonally adjusted purchase index, widely considered a timely gauge of new home sales, dropped 11.8 percent to 356.0. The index came in below its year-earlier level of 402.9, a drop of 11.6 percent.
The group's seasonally adjusted index of refinancing applications plummeted 38.1 percent to 2,636.0. The index surged 82.2 percent the previous week.
The index, however, was up 25.6 percent from its year-ago level of 2,098.3.
Consumers seeking to refinance their existing home loans tend to be highly sensitive to shifts in interest rates.
The refinance share of applications decreased to 53,4 percent from 62.0 percent the previous week. The ARM share of activity increased to 5.4 percent, up from 3.8 percent the previous week.
While the battered U.S. housing market has not bottomed out yet, data last week suggested it may be nudging closer to recovery, particularly a better-than-expected existing home sales report for February from the National Association of Realtors.
An unwieldy supply of homes for sale remains one of the biggest obstacles facing the hard-hit sector.