U.S. mortgage applications fell for a third consecutive week, reaching its lowest level in over six years as demand for home refinancing loans plunged, 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 May 30 dropped 15.3 percent to 502.3 -- its lowest level since the week ended April 19, 2002.
The U.S. housing market is suffering one of the worst downturns in its history.
Significantly tighter lending standards and an unwieldy supply of homes for sale are just some of the factors preventing the U.S. housing market from recovering from its two-year-long slump.
The souring of demand for home loans last week may be tied to sharply higher interest rates on mortgages.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.17 percent, up 0.21 percentage point from the previous week.
Interest rates, however, were below year-ago levels of 6.35 percent. The MBA's seasonally adjusted purchase index dropped 5.4 percent to 333.6. The index came in well below its year-ago level of 433.6, a drop of 23.1 percent.
Overall mortgage applications last week were 19.7 percent below their year-ago level. The four-week moving average of mortgage applications, which smoothes the volatile weekly figures, was down 6.0 percent to 597.9.
The group's seasonally adjusted index of refinancing applications plunged 25.7 percent to 1,496.1. The index was down 14.9 percent from its year-ago level of 1,757.1.
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 40.6 percent from 46.1 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 8.7 percent, down from 9.3 percent the previous week.
Fixed 15-year mortgage rates averaged 5.70 percent, up from 5.49 percent the previous week. Rates on one-year ARMs decreased to 6.80 percent from 6.92 percent.
While U.S. housing market indexes tend to be volatile, the data from the MBA may help gauge how the hard-hit sector is faring this spring, which is traditionally the peak of the home-buying season.