The number of mortgage applications in the U.S. fell last week by the most this year as higher lending rates led to a slump in refinancing.
The Mortgage Bankers Association’s index declined 16.5 percent in the week ended Nov. 26, figures from the Washington- based group showed today. The gauge of refinancing fell 21.6 percent, the biggest drop of the year. The measure of purchases climbed 1.1 percent.
The average rate on a 30-year fixed mortgage rose to the highest level since August, an increase that follows data showing the economy gaining strength at the end of the year. With mounting foreclosures adding to inventory and unemployment near 10 percent, a sustained improvement in home sales and construction will take time to develop.
“Mortgage rates are higher than they were a few weeks ago so refinancing and new purchase mortgage volumes are going to be slow, probably until we get into the new year,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report.
The share of applicants seeking to refinance a loan fell to 74.9 percent last week from 78.6 percent the prior week, today’s figures showed.
The average rate on a 30-year fixed mortgage increased to 4.56 percent from 4.50 percent the prior week. Borrowing costs have been rising since reaching 4.21 percent during the week ended Oct. 8, the lowest in records going back to 1990.
At the current 30-year rate, monthly payments for each $100,000 of a loan would be about $510.26, or $14 less than a year ago when the rate was 4.79 percent.
The average rate on a 15-year fixed mortgage rose to 3.91 percent from 3.83 percent, and the rate on a one-year adjustable mortgage declined to 6.81 percent from 7.09 percent.
Housing demand has resumed its decline after a tax credit worth as much as $8,000 expired. Sales of existing homes, which now make up more than 90 percent of the market, fell more than forecast in October as foreclosure moratoriums and a lack of credit disrupted real estate, figures from the National Association of Realtors showed last week. In July, sales ran at the weakest pace in a decade’s worth of record-keeping by the group.
Homebuilders remain gloomy. Atlanta-based Beazer Homes USA Inc., which builds and sells entry-level homes in the South, remains “cautious” in its outlook.
“Sustained high unemployment levels and the overhang of foreclosures make it very difficult to predict when and to what extent the housing market will recover,” Ian J. McCarthy, chief executive officer at Beazer said on a conference call Nov. 5.
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