Mortgage applications fell last week, as the highest borrowing costs in more than four years discouraged Americans from refinancing.
The Mortgage Bankers Association said Wednesday that its index of applications to buy a home or refinance an existing loan declined 0.8 percent, to 567.6, from the previous week.
The average rate on a 30-year fixed mortgage jumped to 6.73 percent last week, the highest since May 2002, from 6.61 percent a week earlier.
A measure of refinancing fell 2.2 percent, to 1466.1. Refinancing’s share of all loan applications slipped to 35.5 percent last week from 35.7 percent, and was down 43 percent from the same time last year, removing a source of cash used by homeowners to spend and power the economy.
Economists and Federal Reserve policymakers forecast that rising mortgage rates will further slow purchases of homes.
“We’re seeing a cooling in housing market activity,” said Glenn Haberbush, an economist at Mizuho Securities USA Inc. in New York. “When we look at the nation as a whole, it does appear to be orderly.”
The index of purchases was little changed at 414.8 last week. Purchases are down 22 percent from a peak in June 2005.
“It’s been a seller’s market, and it’s turning into a little more normal market where buyers have a little more power than they did over the last few years,” said Ara Hovnanian, chief executive of Hovnanian Enterprises Inc., New Jersey’s largest builder.
Job and income growth are helping the housing market stave off an outright collapse. The Commerce Department said Tuesday housing starts rose 5 percent in May.
“We’ll see a soft landing in the housing market.” said Patrick Newport, an economist at Global Insight Inc. in Lexington, Mass.
Borrowing costs are rising as Fed policymakers look to extend a series of 16 interest-rate increases since June 2004.
