Mortgage Apps dip as rates rise.....

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Rich Storey
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Mortgage applications dip as rates rise
'People are still lacking the confidence to commit,' says expert.

NEW YORK (Reuters) -- U.S. mortgage applications decreased last week, reflecting a sharp drop in demand for refinancing as mortgage rates ticked higher, an industry group said on Wednesday

The decline followed recent robust gains, and came amid the unveiling of the strongest government action yet to aid homeowners since the housing market's meltdown began.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications , which includes both purchase and refinance loans, for the week ended Feb. 20 decreased 15.1% to 743.5 after surging 45.7% the previous week.

The MBA's seasonally adjusted purchase index fell 2.6% to 250.5 after rising 9.1% the previous week, and was down 30.1% from its year-ago level. It hit an eight-year low of 248.5 in November.

Overall mortgage applications last week were 11.8% above their year-ago level. The four-week moving average of mortgage applications, which smoothes the volatile weekly figures, was up 0.4%.

The Mortgage Bankers' seasonally adjusted index of refinancing applications plunged 19.1% to 3,618.0 after soaring 64.3% the previous week, and it was up 47.1% from its year-ago level.
President Barack Obama last week announced a plan designed to provide much-needed support to the housing market. It aims to support refinancing for good quality borrowers; help distressed borrowers avoid foreclosure; and stimulate new housing demand through the expansion of Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500).

Lawrence J. White, professor of economics at New York University's Stern School of Business, said if he were to grade the housing plan he would give it a "B" or a "B-plus."

"The housing plan leaves out a major piece, which is the problem of what to do with somebody who holds a second mortgage, a substantial problem, especially on a lot of these foreclosure or close to foreclosure mortgages," he said on Tuesday. "The housing plan does not go far enough."
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 5.07% in the latest week, up 0.08 percentage point from the previous week. Six weeks earlier, mortgage rates hit the lowest level recorded in the MBA survey's history, at 4.89%. Interest rates were well below year-ago levels of 6.27%.

The U.S. housing market is in the worst downturn since the Great Depression and its impact has rippled through the recession-hit economy. Economists contend the economy might not emerge from its slump unless the housing market stabilizes.

"No question about it, buying a home is a riskier proposition right now than it was four years ago, but it can still happen," White said.

"The fact that there is now much more explicit government attention at the mortgage level, rather than just at the bank or troubled securities level, is valuable and can help turn things around," he said.

The adjustable-rate mortgage share of activity increased to 1.9%, up from 1.7% the previous week.

Fixed 15-year mortgage rates averaged 4.71%, up 4.66% the previous week. Rates on one-year ARMs increased to 6.13% from 6.10%.

"With the continued debate over the stimulus package, people are still lacking the confidence to commit and are waiting to really pull the trigger once they are comfortable that prices and rates aren't going to change drastically anymore," said Leif Thomsen, CEO of Mortgage Master in Walpole, Massachusetts.

"We'll still see better movement on the refinancing side but look for it to be more drawn out," he said.

Other data on Wednesday painted a poor picture of the U.S. housing market.
The National Association of Realtors said the pace of sales of existing homes in the United States fell 5.3% in January to a 4.49 million-unit annual rate while home prices and inventories dropped.

Economists polled by Reuters were expecting home resales to rise to a 4.79 million-unit pace from December's 4.74 million rate.

Credited to: www.CNNMoney.com