U.S. mortgage applications fell for a third straight week, with demand for home purchase loans sinking to the lowest level in 13 years as inclement weather weighed, data from an industry group showed on Wednesday.
A continued drop in demand for purchase loans, a tentative early indicator of home sales, would not bode well for the hard-hit U.S. housing market, which remains highly vulnerable to setbacks and heavily reliant on government intervention.
The Mortgage Bankers Association reported an 8.5 percent decline in its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Feb. 19.
The four-week moving average of mortgage applications, which smoothes the volatile weekly figures, was up 1.6 percent.
The MBA's seasonally adjusted purchase index fell 7.3 percent, the lowest level since May 1997.
"As many East Coast markets were digging out from the blizzard last week, purchase applications fell, another indication that housing demand remains relatively weak," Michael Fratantoni, MBA's vice president of research and economics, said in a statement.
"With home prices continuing to drift amid an abundant inventory of homes on the market, potential homebuyers do not see any urgency to lock in purchases," he said.
The MBA's seasonally adjusted index of refinancing applications decreased 8.9 percent. The refinance share of mortgage activity decreased to 68.1 percent of total applications from 69.3 percent the previous week.
The shares of adjustable-rate mortgages, or ARM, increased to 4.7 percent from 4.4 percent the previous week. A rise in rates may have played a role. Interest rates on mortgages typically play less of a role in home purchase loan demand than in refinancing activity.
The MBA said borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 5.03 percent, up 0.09 percentage point from the previous week. That is above the all-time low of 4.61 percent set in the week ended March 27, 2009, but below the year-ago level of 5.07 percent.
The survey has been conducted weekly since 1990.
"Demand is waning due to rising mortgage rates and the fear that rates will move higher after March 31," said Alan Rosenbaum, president of Guardhill Financial, a New York-based mortgage banker and brokerage company.
Mortgage rates are expected to rise when the Federal Reserve stops buying mortgage-related securities at the end of March.
The MBA said fixed 15-year mortgage rates averaged 4.35 percent, up from 4.33 percent the previous week. Rates on one-year ARMs increased to 6.80 percent from 6.67 percent.
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.
More key insight into the state of the housing market will emerge on Wednesday when the U.S. Commerce Department releases January new U.S. single-family home sales data.
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