Mortgage applications fell for the first time in four weeks, with relatively low interest rates having limited appeal for a shrinking universe of qualified borrowers who see the benefit of refinancing home loans, data from an industry group showed on Wednesday.
Demand for loans to purchase a home also fell, albeit on a smaller scale. Should this trend hold, it would not bode well for the U.S. housing market, which remains highly vulnerable to setbacks and reliant on government intervention.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended January 22 decreased 10.9 percent.
The four-week moving average of mortgage applications, which smooths the volatile weekly figures, rose 2.6 percent. The seasonally adjusted purchase index. a tentative early indicator of home sales, fell 3.3 percent.
The seasonally adjusted index of refinancing applications fell 15.1 percent.
If refinancing activity extends its slide it would be a negative for the U.S. economy since it dampens consumer spending. Borrowers often spend some cash saved from lowering their monthly mortgage payment to purchase goods and services.
"Although rates remain low, there appears to be a smaller pool of borrowers who are willing and able to refinance at today's rates," said Michael Fratantoni, the MBA's vice president of research and economics, said in a statement.
The lowest mortgage rates in decades and high affordability helped the hard-hit U.S. housing market find some footing in 2009 after a three-year slump.
Leif Thomsen, CEO of Mortgage Master, in Walpole, Massachusetts, said the uptick in refinancing activity in previous weeks was due to interest rates slipping below 5 percent, widely viewed as a key psychological level.
"The fact is, there is a finite amount of people out there who can still refinance," he said.
The MBA said borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 5.02 percent, up 0.02 of a percentage point from the previous week. An all-time low of 4.61 percent was set in the week ended March 27, 2009. The survey has been conducted weekly since 1990.
Interest rates were below the year-ago's 5.22 percent.
Interest rates are seen rising when the Federal Reserve stops buying mortgage-related securities at end-March. Its agency MBS and agency debt purchase programs, aimed at cutting borrowing costs, will have reached more than $1.4 trillion.
Last week, the refinance share fell to 67.6 percent of total applications from 71.7 percent the previous week. The adjustable-rate mortgage, or ARM, share of activity increased to 4.7 percent from 4.1 percent the previous week.
The MBA said fixed 15-year mortgage rates averaged 4.34 percent, up from 4.33 percent the previous week. Rates on one-year ARMs increased to 6.84 percent from 6.72 percent.
(Editing by W Simon)
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