Home mortgage applications fall to 15-year low (AP)

By DEREK KRAVITZ, AP Real Estate Writer Derek Kravitz, Ap Real Estate Writer – Wed Aug 24, 2:42 pm ET

WASHINGTON – Mortgage applications to purchase a home fell last week to a 15-year low, despite the lowest mortgage rates in decades.

Many potential buyers are holding off because they are worried about job security and fear the economy could slip back into another recession.

The Mortgage Bankers Association said Wednesday that an index measuring mortgage applications, which are adjusted for seasonal factors, fell 2.4 percent last week from the previous week. Home mortgage applications plunged 5.7 percent to its lowest level since December 1996.

"Another week of volatile markets and rampant uncertainty regarding the economy kept prospective homebuyers on the sidelines," said Mike Fratantoni, the trade group's vice president of research and economics.

The share of mortgage applications used for refinancing has risen to nearly 80 percent of the market, up from 70 percent just three weeks ago.

Few expect the lowest mortgage rates in decades to energize the depressed housing market. Over the past year, the average rate on the 30-year fixed mortgage has been below 5 percent for all but two weeks. Last week, it hit a four-decade low of 4.15 percent.

Yet sales remain unhealthy. Sales of new and previously occupied homes both fell in July. Sales of new homes are on pace to finish the year as the lowest on records dating back to 1963. The pace of re-sales is shaping up to be the worst in 14 years.

Home prices haven't fared much better. Since the peak of the housing boom in 2007, homes have lost nearly a third of their value.

The weak housing market has been a drag on the economy. And without more jobs, the housing market is unlikely to recover any time soon.

Roughly 14 million Americans are unemployed. The economy created just 117,000 net jobs in July, barely enough to keep up with the population growth. It needs to generate twice as many to make a noticeable dent in the unemployment rate, which was 9.1 percent last month.

The weekly survey covers more than half of all U.S. residential mortgage applications.

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Rate on 15-year mortgage falls to record low (AP)

WASHINGTON – The average rate on a 15-year fixed mortgage has fallen to a record low, leading to an increase in refinancing applications. But cheaper loans are unlikely to lift the struggling housing market or boost the weak economy.

The rate on the 15-year loan, a popular refinancing option, dropped to 3.54 percent this week from 3.66 percent last week, Freddie Mac said Thursday. That's the lowest since the mortgage buyer began tracking it in 1991. Analysts say they believe it is lowest rate of all time.

The average rate on the 30-year fixed loan fell to a yearly low of 4.39 percent from 4.55 percent the previous week.

Mortgage rates tend to track the yield on the 10-year Treasury note. A weakening U.S. economy has led many investors to shift money from stocks to bonds, which are seen as safer bets. That has pushed Treasury yields to their lowest level this year. Bond yields fall as demand increases.

Low mortgage rates and depressed home prices have had little impact on home sales.

Sales of previously occupied homes fell in June for a third straight month to a seasonally adjusted 4.77 million. The pace is lagging behind the 4.91 million homes sold last year — the fewest since 1997.

New-home sales also declined in June and are trailing last year's sales, which were the worst on records dating back nearly half a century.

Many people can't take advantage of the low mortgage rates. Banks are insisting on higher credit scores and larger down payments from applicants. Others have too little equity invested in their homes to qualify for loans.

Refinance applications increased at the end of July, the Mortgage Bankers Association said Wednesday. But activity remains almost 30 percent below last year's level, the MBA said.

Mortgage rates have been near historically low levels for almost two years. Last year, the average rate on the 30-year loan fell to 4.17 percent — the lowest level in four decades. The 15-year fixed loan dropped to 3.57 percent, a previous record low.

"The pool of homeowners who can refinance just continues to shrink, either because they already refinanced or because it's hard to get credit, or in a lot of cases, because homeowners" owe more than their houses are worth, said Patrick Newport, U.S. economist with IHS Global Insight.

A higher number of refinancing applications is unlikely to have much economic impact. Many people have little or no equity in their homes. So they are not pulling money out when they refinance for home-improvement projects or other big expenditures.

Also, those who switch from 30-year loans to 15-year mortgages might face higher monthly payments, especially if they are shortening the length of their loan by a large amount.

"From a macroeconomic point of view, I don't think it's very important because the eligible pool is not that big compared to the size of the economy," Newport said.

To calculate average mortgage rates, Freddie Mac collects rates from lenders across the country on Monday through Wednesday of each week.

The average rate on a five-year adjustable-rate mortgage fell to 3.18 percent, its lowest level on records that go back to January 2005. Last week's reading of 3.25 percent also was a record low.

The average rate for one-year adjustable-rate loans rose to 3.02 percent from 2.95 percent last week. Last week's average rate matched the record low set two weeks earlier on records dating back to 1984.

The rates do not include extra fees known as points. One point is equal to 1 percent of the total loan amount.

The average fees for the 30-year and 15-year fixed loans and the 5-year adjustable loan were unchanged at 0.8 point, 0.7 point and 0.6 point, respectively. The average fee for the one-year ARM fell to 0.5 point from 0.6 point last week.

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