Mortgage Applications Decreased 2.8 Percent Last Week

Mortgage applications in the U.S. fell 2.8 percent last week, led by the biggest drop in purchases since January.

The Mortgage Bankers Association’s index of applications to buy a home or refinance a loan fell to 654.2 from 673.2 the prior week. The group’s purchase index dropped 7.3 percent and its refinancing gauge increased 3.3 percent.

Stricter lending standards caused by concern over subprime mortgages are making it difficult for Americans to borrow, prolonging the housing slump. The National Association of Realtors said yesterday that sales of previously owned homes fell in August to a five-year low.

“We’re not likely to see a turnaround in housing for some time,” Julia Coronado, senior U.S. economist at Barclays Capital Inc. in New York, said before the report.

The mortgage bankers’ purchase index fell to 418.8 from 452 the prior week. The decline was the biggest since the week ended Jan. 19.

The refinancing index rose to 2026.5 from 1962.

Most economists agree the applications report overstates demand because the survey only includes retail lenders, which have probably seen an increase in business as many wholesale brokers closed their doors.

The average rate on a 30-year fixed loan rose to 6.38 percent last week from 6.29 percent. At the current rate, monthly borrowing costs for each $100,000 of a loan would be about $624.20.

Mortgage Rates

The average rate on a 15-year fixed mortgage increased to 6.06 percent from 5.99 percent, while the rate on a one-year adjustable mortgage decreased to 6.09 percent from 6.39 percent.

Applications to refinance loans made up 46.4 percent of the total, up from 43.5 percent the prior week, the bankers said. The group’s fixed-rate mortgage index fell 2.8 percent and its measure of adjustable-rate mortgages declined 6.4 percent.

A drop in home prices may make it harder for people to refinance loans just as more interest-only and adjustable-rate mortgages are resetting to higher rates, economists said.

The number of Americans who may lose their homes to foreclosure more than doubled in August from a year earlier, according to a report last week by RealtyTrac Inc.

A rise in the number of unsold homes is weighing on house prices, keeping many people on the sidelines as they await further declines. Home prices in 20 U.S. metropolitan areas fell 3.9 percent in the 12 months ended in July, the most since record keeping began in 2001, according to the S&P/Case-Shiller home-price index released yesterday.

“Heavy discounting by builders, and now the existing home market as well, has continued to drive pricing downward,” Lennar Corp. Chief Executive Officer Stuart Miller said in a statement yesterday.

Lennar, the largest U.S. homebuilder, reported the biggest quarterly loss in its 53-year history. Revenue at the company fell 44 percent.

The Washington-based Mortgage Bankers Association’s loan survey, compiled every week since 1990, covers about half of all U.S. retail residential mortgage originations.

U.S. MBA’s Mortgage Applications Index Decreased 2.8% Last Week