Mortgage applications in the U.S. last week fell by the most in four months as higher borrowing costs discouraged filings for home purchases and refinancing.
The Mortgage Bankers Association’s index of applications to buy a home or refinance a loan fell 7.3 percent, the most since the week ended Jan. 19, to 636.4. The group’s gauge of purchase applications fell 2.5 percent and a measure of refinancing dropped 13 percent.
The highest mortgage rates in seven months may have discouraged refinancing and kept buyers on the sidelines as they waited for home prices to fall. The report, along with figures showing a rise in mortgage defaults among subprime borrowers, suggests housing will continue to weigh on economic growth.
“We’ll probably have another leg down in terms of the ripple effects on the economy from housing,” Michael Gregory, a senior economist at BMO Capital Markets in Toronto, said before the report. “There’s still an awful lot of inventory, and that’s going to apply downward pressure on prices.”
The mortgage bankers’ purchase index fell to 427 last week from 438.1 the previous week.
Prices are responding to lower demand and an excess supply of unsold homes. House prices dropped 1.4 percent last quarter compared with the same period last year, the first decline in almost 16 years, according to a report yesterday by S&P/Case- Shiller.
Still, lower prices haven’t been enough to jumpstart home sales. Combined sales of new and existing homes last month fell to 6.971 million, a four-year low.