Mortgage applications dip despite low rates
Applications fell 8.2% in the week ended Jan. 2 after hitting a 5-year high the previous week.
Current Mortgage Rates |
| Type | Overnight avgs |
|---|---|
 | |
| 30 yr fixed mtg | 5.30% |
| 15 yr fixed mtg | 4.81% |
| 30 yr fixed jumbo mtg | 6.31% |
| 5/1 ARM | 4.62% |
| 5/1 jumbo ARM | 5.11% |
| |
NEW YORK (Reuters) -- NEW YORK (Reuters) - Applications for U.S. residential mortgages slipped from lofty levels last week as homeowners slowed refinancings ahead of expected federal action to lower housing costs, an industry group said on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity fell for the first week in four, dropping 8.2% to 1,143.8 in the week ended Jan. 2. A week earlier, it hit a five-year high.
Borrowers may have slowed applications in anticipation of the Federal Reserve's program to purchase up to $500 billion in mortgage-backed securities, which is aimed at lowering rates lenders charge to consumers, an MBA economist said. The Fed began its purchases on Monday, fueling a sharp drop in premiums that investors demand to own the bonds, and by extension, a probable drop in mortgage rates this week, analysts said.
Fixed 30-year mortgage rates averaged 5.07% in the week, up from 5.03% the prior week, according to the MBA's survey. The rate has plunged from 6.47% at the end of October, mostly after the Fed announced its intentions.
"With all the talk the Fed is buying (MBS), rates could drop further and (borrowers) may say, 'Why not wait a little more"' before refinancing, said Orawin Velz, associate vice president of economic forecasting at the MBA.
The jump in applications during December may have been homeowners already "on the fence" and prepared to refinance on a drop in mortgage rates, she added.
Average 30-year fixed rates are headed toward, or below, 4.75%, compared with 5.1% in a recent Freddie Mac survey, Tony Crescenzi, chief bond market strategist at Miller Tabak & Co., said in a client note on Tuesday.
The plan to lower mortgage rates is seen as one of the most promising federal plans to stabilize the housing market, which is in its worst downturn since the 1930s. But because lending standards have tightened across the industry, many troubled borrowers will not be helped no matter how low the rate.
Broken down, the MBA's seasonally adjusted index of refinancing applications decreased 12.3% to 5,904.5 last week. But the gauge of loan requests for home purchases increased a third straight week, by 7.3% to 344.2. 
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