Demand for refinancing sends applications down 7.2%, according to the Mortgage Bankers Association.

(Source: Reuters)

A spike in U.S. mortgage rates drove down total home loan applications last week as demand for refinancing shriveled to the lowest level since November, the Mortgage Bankers Association said on Wednesday.

Borrowing costs have soared as bond yields have risen, even as the Federal Reserve has sopped up hundreds of billions of dollars in bonds to keep rates low and stimulate the housing market.

The average 30-year fixed mortgage rate jumped 0.32 percentage point in the June 5 week to 5.57 percent. That was nearly a full point above the record low rate of 4.61 percent in March, the trade group said.

The vast majority of mortgage activity this year has been from homeowners cutting costs with new loans at rock-bottom rates.

The Mortgage Bankers Association’s seasonally adjusted index of total applications dropped 7.2 percent to a four-month low of 611.0 in the latest week.

The refinancing index slumped 11.8 percent to a nearly seven-month low of 2,605.7 last week, and refinancing accounted for about 59 percent of all applications, the lowest share since November. As recently as April, refinancings accounted for almost 80 percent of all home loan applications.

Read Lynn Adler’s full article “Rising U.S. mortgage rates sap loan applications” in Reuters (June 10, 2009).

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