UPDATE 1-US mortgage demand drops as refinancing slumps -MBA

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NEW YORK, Dec 1 (BestGrowthStock) – Applications for U.S. home
mortgages dropped last week as interest rates rose to the
highest level since mid-August, driving down applications for
refinancing, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally
adjusted index of mortgage application activity declined 16.5
percent to 608.8 in the week ended Nov. 26.

The MBA’s refinancing applications index plunged 21.6
percent to a reading of 2,974.4, the lowest reading since early
June. The drop coincided with a rise in fixed 30-year mortgage
rates to 4.56 percent in the week from 4.50 percent in the
previous week.

It was the highest level for average 30-year rates since
the week ending Aug. 13, the MBA said.

For a chart on U.S. mortgage applications, click

The recent rise in rates has essentially closed the
refinancing window on nearly $1 trillion in existing mortgages,
said Scott Buchta, head of investment strategy at Braver Stern
Securities in Chicago.

Regulators and lawmakers have already been disappointed
over the refinancing response of low interest rates engineered
under U.S. monetary policy. As the housing slump lingers, banks
and mortgage funding giants Fannie Mae and Freddie Mac have
kept underwriting guidelines tight — or tightened them more —
cutting off credit and limiting housing demand.

Weighted average credit scores have increased to near 750
in recent months from below 720 at the start of 2008, while the
average balance of new loans relative to the property value has
slid to the low-70 percent range from around 80 percent,
according to Lender Processing Services data.

Many borrowers who no longer see benefit in refinancing are
ones that took advantage of falling rates in the spring of 2009
when 30-year mortgage rates fell below 5 percent, Buchta said.

Elsewhere, the MBA’s home purchase loan application index
edged higher by 1.1 percent to 207.2.

(Reporting by Al Yoon; Editing by Andrew Hay)

UPDATE 1-US mortgage demand drops as refinancing slumps -MBA