The highest 30-year mortgage rates in a year eroded demand for U.S. home loan applications last week, according to an industry trade group on Wednesday.
The Mortgage Bankers Association's seasonally adjusted application index dropped 6.2 percent in the week ending July 18 to 489.6, with a 6.59 percent 30-year mortgage rate depressing applications for purchases and refinancing.
Average 30-year home loan rates jumped 0.37 percentage point in the week, surpassing the 6.57 percent rate in mid-June to match the rate posted in the July 20 week of 2007, the trade group said.
In that week last year, the MBA's total applications index was 609.0, having fallen from just over 1,000 as recently as early February.
Rising mortgage rates make it even harder to mend the worst housing market since the Great Depression.
The MBA's purchase applications index fell 6.7 percent last week to 335.6, and its refinancing applications gauge dropped 5.6 percent to 1,392.7 on a seasonally adjusted basis.
Inventories of unsold homes are hovering around all-time highs, inflated by record foreclosures.
At the same time, lenders burnt by the spate of defaults and foreclosures on mortgages made when standards were much looser have raised the bar for borrowers trying to get new loans approved.
These conditions have pressed home prices down since peaking two years ago.
Through April, house prices in 20 metro areas tracked in the Standard & Poor's/Case-Shiller index fell nearly 18 percent from July 2006.
May's data will be reported on Tuesday, July 29.
By another measure, home prices fell for a third straight month in May to stand 4.8 percent lower than a year earlier, the Office of Federal Housing Enterprise Oversight said on Tuesday.
OFHEO tracks loans purchased by government-sponsored mortgage agencies Fannie Mae and Freddie Mac, and reflect mainly lower risk mortgages.
Rescue legislation aimed at providing government support, if needed so that Fannie and Freddie can keep buying mortgages and bolstering U.S. housing, is now before Congress.