May 18, 2005
Bloomberg
U.S. mortgage applications fell last week by the most this year as a measure of home purchase originations declined from a record, a survey of lenders showed today.
The Mortgage Bankers Association's index of mortgage applications dropped 10.5 percent to 699.2 from 781 a week earlier. It was the biggest decline since the last week of December. In the previous week, the gauge jumped 9.4 percent to the highest level since April 9, 2004.
With purchases applications close to an all-time high, economists forecast home sales this year to be the second-highest on record, helped by an improving labor market, wage growth and borrowing costs at historic lows.
``Low interest rates and solid employment growth are still stoking the home-buyer fire,'' Sherry Cooper, chief economist at BMO Nesbitt Burns in Toronto, said before the report.
The gauge of applications for mortgages to purchase homes fell 10.8 percent to 469.3 from an all-time high of 526.2 in the prior week.
The bankers group's index of applications to refinance existing loans fell 10 percent to 2036.7 from 2263.3. Refinancing applications are up 12 percent from the same time last year.
``A lot of people thinking about refinancing or buying that home realize that mortgage rates will not stay where they are forever,'' Joseph Campanelli, co-vice chairman of Sovereign Bancorp Inc., said in an interview on May 11. ``It's probably the last surge coming through.''
MORTGAGE RATES
The average rate on a 30-year fixed mortgage fell to 5.73 percent from 5.77 percent a week earlier. At last week's average, monthly borrowing costs for every $100,000 of a loan would be $582.30.
Mortgage rates as measured by the Mortgage Bankers Association have stayed within 1.5 percentage points of the four- decade low of 4.99 percent reached in June 2003. That's helping make homes more affordable.
Combined sales of new and previously owned homes are expected to be 7.874 million after last year's record 7.99 million, according to a forecast from the National Association of Realtors.
Housing starts in April rose 11 percent, the Commerce Department said yesterday. Building permits, a signal of future construction, rose 5.3 percent to a 2.129 million annual rate. That figure is close to January's 2.132 million, which was the highest in almost 22 years.
Mortgage rates are expected to rise this year as the Federal Reserve continues to boost short-term interest rates to hold down inflation. The Fed earlier this month raised its benchmark interest rate a quarter point to 3 percent, the eighth increase in as many meetings.
The mortgage bankers' survey covers approximately 50 percent of all retail residential mortgage originations and has been conducted weekly since 1990. The base period is March 16, 1990, when the value for all indexes was 100.
To contact the reporter on this story:
Courtney Schlisserman in Washington cschlisserma@bloomberg.net
Last Updated: May 18, 2005 07:00 EDT
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