Mortgage Applications Fell 8.2% From The Week Before

Written By: admin on January 7, 2009 No Comment

Wednesday, January 07, 2009, Mortgage Applications for U.S. residential slipped from lofty levels last week as homeowners slowed refinancing ahead of expected federal action to lower housing costs, an industry group said.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity fell for the first week in four, dropping 8.2% to 1,143.8 in the week finished Jan. 2.

Borrowers may have slowed applications in anticipation of the Federal Reserve’s program to buy up to $500 billion in mortgage-backed securities, which is aimed at lowering rates lenders charge to consumers, an MBA economist said.

The Fed started its buys on Monday, fueling a sharp drop in premiums that investors demand to own the bonds, and by extension, a probable drop in mortgage rates this week, analysts said.

30-year fixed mortgage rate averaged 5.07% in the week, up from 5.03% the prior week, according to the MBA’s survey. The rate has plunged from 6.47% at the end of October, mostly after the Fed announced its intentions.

“With all the talk the Fed is buying (MBS), rates could drop further and (borrowers) may say, ‘Why not wait a small more”‘ before refinancing, said Orawin Velz, associate vice president of economic forecasting at the MBA.

The jump in applications during December may have been homeowners already “on the fence” and prepared to refinance on a drop in mortgage rates, she added.

Average 30-year fixed rates are headed toward, or below, 4.75%, compared with 5.1% in a recent Freddie Mac survey, Tony Crescenzi, chief bond market strategist at Miller Tabak & Co., said in a client note on Tuesday.

Broken down, the MBA’s seasonally adjusted index of refinancing applications decreased 12.3% to 5,904.5 last week.