U.S. mortgage applications plummeted last week to the lowest level in nearly five months, dragged down by a plunge in demand for home refinancing loans as interest rates nudged higher, an industry trade group said on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and purchasing loans, for the week ended December 22 decreased 14.2 percent to 555.8, its lowest level since early August. The index stood at 647.6 in the previous week.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.12 percent, up 0.02 percentage point from the previous week. Three weeks prior, 30-year mortgage rates sank to 5.98 percent, the lowest level since October 2005.
Demand for home purchase loans also weakened as the MBA's seasonally adjusted purchase index, widely considered a timely gauge of U.S. home sales, fell 10.6 percent to 390.2, its lowest since late October. The index was also below its year-ago level of 432.9.
Also driving demand lower last week was a 18.5 percent fall in the MBA's seasonally adjusted index of refinancing applications to 1,604.6, its lowest since early September. A year earlier the index stood at 1,259.1.
The refinance share of applications decreased to 48.8 percent from 50.8 the previous week.
Fixed 15-year mortgage rates averaged 5.84 percent, up from 5.82 percent. Rates on one-year adjustable-rate mortgages (ARMs) increased to 5.87 percent from 5.82 percent.
The ARM share of activity decreased to 23.1 percent of total applications from 23.6 percent the previous week, its lowest since October 2003.
The weak MBA mortgage figures precedes separate data this week gauging the state of the U.S. housing market.
The Commerce Department will release data on new U.S. home sales in November on Wednesday morning. The National Association of Realtors will release data on existing U.S. home sales in November on Thursday.
The MBA's survey covers about 50 percent of all U.S. retail residential loans. Respondents include mortgage banks, commercial banks and thrifts.