ICS Magazine

Mortgage Requests Fall to January Low

May 19, 2004
NEW YORK (Reuters) - New U.S. mortgage applications, particularly refinancings, dropped sharply last week, despite mortgage rates falling for the first time since early March, an industry trade group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted market index, a measure of weekly mortgage activity, declined for the week ending May 14 by 11.9 percent to 654.1 from the previous week's 742.2. This was the lowest level since 599.9 touched in the first week of January.

Last week's decline in loan requests for both refinancing and for home purchases, however, is not big enough to alter economists' view that the housing boom has plenty of steam left.

"There remains more to the housing boom other than low mortgage rates," said Richard DeKaser, chief economist at National City Corp including demographic factors that are fueling demand for homes among first-time buyers as well as retirees.

This also represents the effect of more flexible loan products like hybrid mortgages that facilitate home purchases.

Average 30-year mortgage rates, excluding fees, fell by 11 basis points to 6.21 percent. Last week's average 30-year rates were up 104 basis points from the comparable week a year ago.

Mortgage rates have trended higher since mid-March with rising Treasury yields as data suggested faster U.S. economic growth and growing inflationary pressure. Higher mortgage rates have curtailed refinancing activities, but home sales and construction have yet to show signs of dropping off.