On Wednesday, data from an industry group showed that for the first time in four weeks, U.S. mortgage applications fell, this has happened due to a drop in demand for home refinancing loans as interest rates jumped up.
Applications for loans to buy a home were flat which are considered as an early indicator of sales. Lack of interest for purchase loans does not bode well for the hard-hit U.S. housing market, which has been otherwise showing good signs that the housing market is gradually stabilizing.
For the week ended July 24, there has been a decrease of 6.3 % to 495.4 in seasonally adjusted index of mortgage applications USMGM=ECI that includes both purchase and refinance loans, said by The U.S. Mortgage Bankers Association.
Excluding the fees the borrowing costs on 30-year fixed-rate mortgages, averaged 5.36 %, which has been risen up to 0.05 % point from the previous week, and it is sharply higher than the all-time low of 4.61 % which has been set in the week ended March 27. Since 1990, the survey has been conducted weekly.
However, interest rates were quite below the levels of 6.46 % which were set a year ago.
But, for a ninth straight week mortgage rates still continues to remain above 5.0 % . It is said by some experts that mortgage rates at 5.0 % and below are the level which is necessary to make a significant impact on the demand of home loan.
And as the U.S. unemployment rate is at 9.5 percent, so many potential home buyers who have already lost or who fear that they may lose their jobs choose to remain sidelined even though there has been a significant improvement in home affordability.