NEW YORK (Reuters) - U.S. mortgage application activity decreased to its lowest in 2-1/2 years last week as loan requests to refinance an existing home fell to their weakest level since December 2000, the Mortgage Bankers Association said on Wednesday.
The Washington-based group’s seasonally adjusted index on weekly home loan requests fell 3 percent to 342.5 in the week ended Aug. 3. This was the lowest reading since 328.6 in the week of Jan. 1, 2016.
The decline in home refinancing could be a future drag on domestic consumer spending. Homeowners refinance their homes either to reduce their monthly mortgage payments or to extract cash from the values of their homes.
So far, the drop in refinancing due primarily to higher mortgage rates has yet to hurt household expenditures.
MBA’s barometer on mortgage applications for refinancing declined by 4.5 percent to 927.6 last week, which was its lowest in more than 17-1/2 years.
The share of refinancing fell to 36.6 percent of total applications from 37.1 percent the week before. It held above 34.8 percent set in July, which was its smallest share since August 2008.
Interest rates on 30-year fixed-rate “conforming” home loans, whose balances are $453,100 or less, averaged 4.84 percent, unchanged from a week earlier but up from 4.22 percent at the end of 2017, MBA said.
Most mortgage rates MBA tracks were lower than the previous week.
Meanwhile, MBA’s measure on loan applications to buy a home, a proxy on future housing activity, fell 2 percent to 233.1 in the latest week, which was the lowest since 225.5 in the week of Feb. 16.
Home sales and construction have softened in recent months as a result of rising borrowing costs, tight housing inventories and expensive home prices.
Reporting by Richard Leong; Editing by Frances Kerry