Mortgage applications plummet in US
afr.com
article:
Aug 21 08:26
AFP
Power cuts and rising interest rates sent applications for US mortgages plunging 10.7 per cent to the lowest level in more than a year last week, data showed on Wednesday.
Applications either to buy a home or refinance a home in the week to August 15 fell to the lowest level since July 2002, seasonally adjusted Mortgage Bankers Association (MBA) figures showed.
"One factor that no doubt negatively affected mortgage applications last week was the blackout in the northeast that shut down many mortgage offices for at least a day," MBA vice president of economics Jay Brinkmann said.
It was impossible to estimate the magnitude of the impact, however, Mr Brinkmann said.
The average interest rate obtained for a 30-year mortgage rose to 6.22 per cent in the week from 6.00 percent the previous week, the MBA said.
A breakdown of the figures showed applications for loans to buy a home slipped 4.9 percent while applications to refinance a home plummeted 14.9 per cent.
The searing home market has helped to power the US economy, with millions of home owners racing to refinance their homes at lower interest rates, resulting in lower monthly payments and fatter wallets.
Many home owners took advantage of rising home prices to expand the size of the loan, getting cash in their hands while leaving monthly mortgage payments about the same, or lower.
Over the past two years, cash and cash equivalents held by individuals had shot up by $US722 billion, said Wells Fargo Banks chief economist Sung Won Sohn.
"Much of the cash-outs from mortgage refinancing have been saved, not spent. This means that the plunge in refinancing activities won't crimp consumer spending," Sohn said.
Yields on benchmark 10-year US government bonds, or Treasuries, were likely to pause a while after racing higher recently. Mortgage rates are closely tied to Treasury yields.
"After a breathtaking surge in yields, the Treasury market is in for some respite," Sohn said.
"A couple of factors that raised Treasury yields - the deflation scare and hedging - are less important now. Now that the deflation concern has abated, interest rates are back to where they should be; about half of the recent increase in yields can be attributed to this fact." |
