Loan applications slow despite interest rate decline

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A reduction in average mortgage rates last week didn’t stop the decline in applications
for home loans, the Mortgage Bankers Assn. reported this morning.

The refinance boom continued to fizzle out, with applications down 30% from the previous
week, to the lowest level since November. Purchase applications
fell by 4.5%, according to the report, which you can read at the website below.

http://www.mbaa.org/NewsandMedia/PressCenter/69498.htm

The average contract interest rate for 30-year fixed-rate home loans decreased to 5.34%
from 5.44% a week earlier. For 15-year fixed loans, the rate averaged 4.81%, down from
4.93%. Points, including the origination fee, edged up to just over 1% of the loan amount
from just a hair under 1%, the trade group said.

The 30-year fixed rate bottomed out at 4.61% at the end of March, the lowest level since
the Mortgage Bankers Assn. started keeping track in 1990.

Many economists believe the economy overall may shift back into growth mode later this
year. But despite some encouraging signs, a solid recovery in housing is likely to take much longer.

That is in part because of the rate trends, Federal Reserve Bank of San Francisco President Janet Yellen said in a speech Tuesday.

‘Even though house prices are continuing to fall in most markets, housing sales and new
construction appear to have stabilized,’ Yellen said in her speech, posted online at
http://www.frbsf.org/news/speeches/2009/0630.html

But she added: ‘I am concerned that mortgage rates, which have risen of late, could place
a drag on a still very sick housing market, potentially driving home prices still lower
and pushing more borrowers into foreclosure.’

— E. Scott Reckard