Mortgage Applications Sink as Loan Rates Rise

The highest home loan rates in more than two months drained demand for refinancing last week, dragging total U.S. mortgage applications to the lowest level since early March, the Mortgage Bankers Association said on Wednesday.

The average 30-year mortgage rate rose 0.12 percentage point to 4.81 percent, above a low of 4.61 percent two months ago though down more than a percentage point from a year ago.

The Mortgage Bankers Association's measure of demand for loans to buy homes rose by 1 percent, but has shown scant momentum during the keenly watched spring sales season.

Refinancing has been the lifeblood of the renewed push for mortgage funding much of this year, and even that has lost steam, according to the industry group's data.

Total U.S. mortgage applications fell 14.2 percent in the week ended May 22 to 786.0 on a seasonally adjusted basis, well off a recent peak of 1,250.6 in early April.

Home loan refinance requests last week slumped 18.9 percent to 3,890.4, about half of the 6,813.5 peak in early April.

Refinancings accounted for just over 69 percent of all applications, after hovering closer to 75 percent in recent weeks.

AP

Requests for loans to purchase homes gained 1.0 percent to 256.6 for the week.

Fixed mortgage rates still remain near record lows.

The average home price nationwide has been slashed by more than 32 percent from the 2006 highs, according to the Standard & Poor's/Case-Shiller indexes.

Affordability remains at record highs, but some key obstacles remain before the housing crisis becomes history.

The market may be on the doorstep of stabilization, according to some housing analysts, but a recovery won't be forthcoming with unemployment rising and foreclosures still setting records.

"We've seen traffic on our site grow every single month since the beginning of the year so there's a huge amount of pent-up demand, particularly from first-time home buyers," said Pete Flint, San Francisco-based chief executive of Trulia, a real estate website.

But there will be bargains for the next few years, curbing the urgency to purchase immediately, he said.

Even as consumer confidence shows signs of improvement, the threat of job loss and inability to make loan payments keeps buyers at bay.

"The housing market is not going to recover until foreclosures stabilize and reduce," which is unlikely in the short run, Flint said. "I would feel a lot more hopeful for the housing market when I see some positive signs in the employment statistics."

The U.S. unemployment rate of 8.9 percent in April was the highest in more than a quarter century and is widely expected to climb.

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