WASHINGTON - With financial institutions continuing to tighten lending standards, mortgage applications fell last week to their lowest level since December 2000, according to Bloomberg News. As a result, the likelihood of consumer spending slowing even more is increasing.
“The biggest threat to the economy is the fragility in the financial system, which stems largely from the deteriorating performance of residential real estate credit,” Michael Feroli, an economist at JPMorgan Chase & Co. in New York, said before the Mortgage Bankers Association (MBA) weekly report. “That performance is unlikely to improve until there are signs of some stabilization in house prices.”
The MBA index of applications to buy or refinance a home loan fell 1.5 percent last week to 419.3. At the same time, the purchase index fell 0.4 percent to 314, while the refinancing measure dropped 3.7 percent to 1,034.5, after falling the previous week from 1,074.6 (READ MORE). The percentage of loan applicants looking to refinance declined to 34.8 percent, the lowest level since July 2006, as falling property values and tighter standards are preventing owners from using home equity to buttress consumer spending.
The average rate on a 30-year, fixed-rate mortgage fell to 6.47 percent last week from 6.58 percent, the report said, down from a mid-January rate of 5.5 percent and 4.99 percent from June 2003. The average rate on a 15-year mortgage fell to 5.99 percent from 6.17 percent, while the rate on a one-year adjustable loan dropped to 7.07 percent from 7.15 percent, down from July’s seven-year high of 7.25 percent.
Homebuilders are struggling to boost earnings amid the housing slump, with the five largest U.S. homebuilders reporting a combined $1.08 billion in losses in their most recent quarters.
The Mortgage Bankers Association is a trade group representing the real estate finance industry. Its 3,000 member companies include mortgage firms, commercial banks, thrifts, life insurance companies and others. Additional information, including the MBA’s Weekly Application Survey, is available at www.mortgagebankers.org.
