Applications for U.S. home mortgages fell in the last week as mortgage rates edged higher and refinancing applications fell, an industry group said on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage activity fell 5.8 percent to 673.3 in the week ended Nov. 26, which was shortened by the Thanksgiving Holiday, following a 5.7 percent drop the previous week.
Economists, however, saw more good news in the report than bad.
Recent strong consumer spending coupled with the decline in refinancing activity suggests consumers are relying less on debt to fund their current consumption, said Chris Low, chief economist of FTN Financial in New York City.
“That is the key,” Low said. “It’s a sign of strength in consumer balance sheets.”
The MBA’s seasonally adjusted index of refinancing applications fell 12.3 percent to 1,912.3 after a decline the prior week.
Both refinancings and adjustable-rate mortgages declined as a percent of total applications last week, the MBA said.
Refinancings were 46.4 percent of total applications, down from 48.4 percent the prior week. Meanwhile, the percent of adjustable-rate mortgages fell to 32.3 percent of the total from 34.0 percent.
The association’s purchase index, a gauge of loan requests for home purchases also dropped, easing 0.6 percent to 460.3, for the fourth consecutive decline.
The purchase index has edged down but remains well above year-ago levels, said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co. in New York City.
This tempers recent declines in consumer confidence measures, Crescenzi said. “We may conclude confidence is down but still high enough to support consumer spending,” he said.
“I expect the housing market to plateau next year,” Crescenzi said.
Some analysts have predicted a 5 percent decline in home sales next year on higher mortgage rates and less demand. However, even a 5 percent decline would still put 2005 15 percent higher than the average during the last five years, Crescenzi said.
Fixed 30-year mortgage rates averaged 5.78 percent, excluding fees, last week, up from 5.64 percent the prior week. One-year adjustable-rate mortgage rates averaged 4.12 percent, excluding fees, little changed from 4.13 percent the prior week.