Business and Finance news

Mortgage applications in the U.S. dropped for a second consecutive week as borrowing costs climbed, a sign the recovery in home sales may cool.

The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan declined 14 percent to 641 in the week ended Oct. 16 from 742.9 a week earlier. The group’s gauge of refinancing decreased 17 percent and the purchase gauge fell 7.6 percent.

Higher borrowing costs and the expiration of an $8,000 tax credit for first-time purchasers at the end of November may be giving would-be homebuyers reason to pause. Economists view stabilization in housing as a key ingredient of any rebound from the worst recession in seven decades.

“Home sales may start to slow down as buyers aren’t able to close before the Nov. 30 deadline to claim the tax credit,” David Semmens, an economist at Standard Chartered Bank in New York, said before the report.

The refinancing gauge fell to 2,808 from 3,374.6 the prior week, today’s report showed. The mortgage bankers’ purchase index decreased to 268.8, the lowest level in two months, from 290.9 the prior week.

The share of applicants seeking to refinance loans declined to 65 percent of all applications from 67.4 percent.

The average rate on a 30-year fixed-rate loan increased to 5.07 percent last week, the highest level in a month, from 5.02 percent the prior week. The rate reached 4.61 percent at the end of March, the lowest level since the group’s records began in 1990.

Less Than 2008

At the current 30-year rate, monthly borrowing costs for each $100,000 of a loan would be $541.11, or about $77 less than the same week a year earlier, when the rate was 6.28 percent.

The average rate on a 15-year fixed mortgage increased to 4 no fax needed payday loans.51 percent last week from 4.44 percent. The rate on a one-year adjustable mortgage rose to 6.86 percent from 6.71 percent.

Some lawmakers are calling for extending the tax credit to boost home sales.

“The work of stabilizing the housing market won’t be done” when the credit expires next month, Senate Banking Committee Chairman Christopher Dodd told a hearing of his panel yesterday. “We still need to use every tool at our disposal to fix this problem.”

Credit Extension

Dodd, a Democrat from Connecticut, and Republican Senator Johnny Isakson of Georgia, a former Realtor, urged their colleagues to extend the credit through next June and to expand it to all couples earning $300,000 or less.

KB Home, the Los Angeles-based homebuilder that sells to first-time buyers, last month reported a third-quarter loss exceeding analysts’ estimates and said a housing recovery isn’t imminent.

“The precise timing of a housing recovery remains uncertain,” Chief Executive Officer Jeff Mezger said in a conference call with analysts and investors Sept. 25.

Federal Reserve policy makers at their September meeting considered a relapse into recession a bigger risk than a near- term rise in prices, according to minutes of the gathering released last week. They decided to slow purchases of mortgage securities to avoid disrupting the housing market while extending the duration of the program by three months.

The Washington-based Mortgage Bankers Association’s loan survey, compiled every week, covers about half of all U.S. retail residential mortgage originations.

Source