U.S. mortgage applications barely advanced last week even as interest rates sank to their lowest levels since May, an industry group said Wednesday, largely reflecting the increasing difficulty borrowers face to obtain a loan as banks tighten lending standards.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, crept fractionally higher, by 0.03 percent, to 656.5 in the week ended Oct. 19 from the previous week's 656.3.
Prospective borrowers have been filing multiple applications to obtain a single loan due to widespread tightening of lending standards, which economists say has been skewing the data in recent months.
Overall mortgage applications last week were 11.5 percent above their year-ago level, even as existing and new home sales are down over 10 percent from 2006.
The four-week moving average of mortgage applications, which smooths out the volatile weekly figures, was up 0.1 percent to 650.4.
Interest Rates Plunge
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.21 percent, down 0.19 percentage point from the previous week, their lowest since the week ended May 11, when they stood at 6.13 percent.
The 0.19 percentage point drop marked the biggest single-week fall in the rate for at least a year, MBA data showed.
Interest rates were below year-ago levels at 6.36 percent.
A rise in demand for home refinancing loans offset a drop in home purchase activity.
The MBA's seasonally adjusted purchase index, slid 3.1 percent to 415.9. The index still came in above its year-earlier level of 382.4, a rise of 8.8 percent.
The group's seasonally adjusted index of refinancing applications increased 4.0 percent to 2,059.3. The index was up 15.0 percent from a year ago when the index stood at 1,790.4.
The refinance share of applications increased to 47.0 percent from 45.3 percent the previous week.
Recent U.S. housing industry indexes, while volatile, generally point to a weak outlook for the industry, suggesting a delayed recovery for the hard-hit sector.
The National Association of Realtors on Wednesday will release data on September existing home sales. The Commerce Department on Thursday will release data on September new home sales.
Fixed 15-year mortgage rates averaged 5.86 percent, down from 6.09 percent. Rates on one-year adjustable-rate mortgages, or ARMs, decreased to 6.10 percent from 6.17 percent.
The ARM share of activity increased to 14.2 percent, up from 13.5 percent the previous week.
The MBA's survey covers about 50 percent of all U.S. retail residential loans. Respondents include mortgage banks, commercial banks and thrifts.