NEW YORK Mortgage applications plunged last week, largely reflecting a drop in demand for home refinancing loans as interest rates surged, an industry group said on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ended April 18 fell 14.2 percent to 637.6.
The U.S. housing market is currently suffering one of the worst downturns in its history. Last week's drop in demand may indicate what is in store for the hard-hit sector this spring, which traditionally is the peak of the home-buying season.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.04 percent, up 0.30 percentage point from the previous week.
Interest rates were below year-ago levels of 6.13 percent.
The MBA's seasonally adjusted purchase index dropped 6.4 percent to 357.3. The index came in below its year-earlier level of 411.0.
The group's seasonally adjusted index of refinancing applications plummeted 20.2 percent to 2,286.3.
Consumers seeking to refinance their existing home loans tend to be highly sensitive to shifts in interest rates.
A sub-index of purchase applications for loans backed by government programs, largely those from the Federal Housing Administration, decreased 2.7 percent to 216.6, but it is up significantly from 87.2 a year ago.
Borrowers have increasingly looked to FHA programs in recent months after lenders that once courted them have now closed or severely tightened requirements for getting a loan.
The MBA's soft report followed data this week that also pointed to weakness in the hard-hit sector.
The National Association of Realtors said on Tuesday existing home sales fell 2 percent in March to an annual rate of 4.93 million units, down from 5.03 million in February.
Later this week, lawmakers on a banking committee of the U.S. House of Representatives are due to draft legislation that would let the largest government homeowner aid program buy more troubled loans.
Expanding the FHA is seen by proponents as a crucial step in stabilizing home prices and putting the brakes on the sliding market.
The Commerce Department on Thursday will release data on new U.S. single-family home sales in March.
(Reporting by Julie Haviv; additional reporting by Albert Yoon, Patrick Rucker and Jennifer Coogan, editing by Walker Simon)