U.S. mortgage applications fall as refinance hits five-year low: MBA

NEW YORK Tue Dec 24, 2013 10:46am EST

A view of single family homes for sale in San Marcos, California October 25, 2013. REUTERS/Mike Blake

A view of single family homes for sale in San Marcos, California October 25, 2013.

Credit: Reuters/Mike Blake

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NEW YORK (Reuters) - Applications for U.S. home mortgages fell for a second week and hit a 13-year low as mortgage rates rose due to a bond market sell-off following the Federal Reserve's decision to pare its bond purchase stimulus in January, an industry group said on Tuesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 6.3 percent to the lowest level since December 2000.

Mortgage applications have fallen sharply since this summer on a jump in home finance costs as benchmark Treasuries yields eventually rose to a two-year high.

Last Wednesday, Fed policy-makers opted to make their tapering move, which will begin in January with a $10 billion monthly reduction evenly split between Treasuries and mortgage-backed securities to $75 billion.

"Following the Federal Reserve's taper announcement, mortgage application volume dropped again last week, with rates increasing and refinance application volume falling to its lowest level since November 2008," Mike Fratantoni, MBA's vice president of research and economics, said in a statement.

The rate on fixed 30-year mortgages averaged 4.64 percent last week, up 2 basis points from the prior week. It fell short of the two-plus year high of 4.80 percent set in September.

The MBA's seasonally adjusted index of refinancing applications fell 7.7 percent.

The gauge of loan requests for home purchases, a leading indicator of home sales, fell 3.5 percent to its lowest level since February 2012.

The refinance share of total mortgage activity slipped to 65 percent from 66 percent the previous week, while adjustable-rate mortgages rose 8.3 percent last week to the biggest share since July 2008.

The MBA typically reports its weekly application data on Wednesday, but released the data a day early due to the Christmas holiday. It said it will suspend release of the data next week. It will resume the release of the data on January 8 with results of the two prior weeks.

The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.

(Reporting by Richard Leong; Editing by Leslie Adler)

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Comments (2)
AZreb wrote:
Isn’t the housing market used as one of the mainstays of our economy? We are now reading how consumer confidence is supposedly rising due to holiday sales, but those sales are seasonal whereas housing is a permanent purchase (or used to be). Lowest since 2008 – doesn’t sound good.

Dec 24, 2013 7:21am EST  --  Report as abuse
RateBid wrote:
All of these regular reports and statistical data is important to watch, but the Fed chose their words wisely this time. The fact is that we must stop economic stimulation at some point, ideally before the added money supply generates any news that could even cause a slight fear of inflation. Somehow the Fed was able to announce a $10 billion monthly decrease in open market bond purchases, yet equities increased by 1 percent that same day and have basically continued to rise since then, and while the 10 year treasury yield finally touched 3 percent today– we did not experience an immediate interest rate increase that will have a huge negative shock mortgage applications and the housing market. The trick was that they made an announcement that would typically cause fear of inflation, which typically triggers an immediate and sometimes drastic increase in interest rates, yet they made some strong statements regarding their commitment to keeping interest rates low. I could almost call this an oxymoron since open market bond purchases are almost the last thing our government has left in their arsenal of tools that they can use to keep rates low. We can’t fix our situation without sacrifice, whether it be the housing market, unemployment, inflation, or our national debt. No single plan will please everybody, but damage control is certainly necessary and that’s exactly what the overall focus must be.

My advice is to plan on mortgage interest rates going up and just shop around for the best deal. These days there are so many tools available to the public online, including multi-lender websites that help introduce borrowers to lenders with the lowest rates and fees, but keep in mind that once you give up a phone number and/or email address then you can expect multiple sales calls. Also, make sure you’re getting quotes that are for your particular scenario since most ads assume perfect credit, income, a large down payment and a large loan amount. www.RateBid.com is a website that allows borrowers to remain anonymous while they get to enjoy watching an endless supply of lenders manually bid interest rates and fees against each other, hoping you’ll contact them via phone or email.

Dec 26, 2013 7:30pm EST  --  Report as abuse
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