Applications for home loans in the US slipped last week, as interest rates increased to its highest level since mid-August, driving down mortgage refinancing applications, according to an industry group.
The Mortgage Bankers Association (MBA) said the index for seasonally adjusted mortgage application activity fell 16.5 percent to 608.8 last week, while the refinancing application index dropped 21.6 percent to 2,974.4, the lowest level since early June.
The decline coincided with the increase of 30-year fixed-rate mortgages at 4.56 percent from 4.50 percent in the previous week. This was the highest level achieved by 30-year rates since end-August, said MBA.
Scott Buchta, head of investment strategy at Chicago-based Braver Stern Securities, said the recent increase in interest rates has significantly closed the refinancing window on approximately US$1 trillion in existing mortgages.
US lawmakers and regulators are already disappointed over the refinancing loan response of low mortgage rates engineered under the US monetary policy.
As the decline in the housing market continues, banks and mortgage lenders Fannie Mae and Freddie Mac have kept underwriting guidelines tight, cutting off credit and limiting housing demand.