New applications for U.S. mortgages fell last week to their lowest weekly level in 2003, as home sales at year's end have cooled from their early torrid pace, a U.S. mortgage industry group said on Wednesday.
The Mortgage Bankers Association said its widely watched mortgage market index, a measure of mortgage loan demand, for the week ending Dec. 26 declined 9 percent to 574.1 from the prior week's 631.2.
The seasonally adjusted reading for last week, shortened due to Christmas, was the lowest since 565.5 for the week ending June 14, 2002. Excluding seasonal factors, the weekly volume of new loan requests was 45.8 percent lower than the prior week.
The housing market has underpinned the U.S. economy, and is poised for record sales in 2003. But home and mortgage demand has retreated from their highs earlier this year, as mortgage rates have climbed from their 45-year lows set in late spring.
"The peak in home sales may be behind us," said Richard DeKaser, chief economist at National City Corp.
Fears over rising rates and falling sales have hurt stocks of lenders and homebuilders. Some lenders like Washington Mutual Inc. announced layoffs in their mortgage units in response to the drop in loan demand.
Sales of U.S. existing homes fell by a bigger than expected 4.6 percent in November to an annualized rate of 6.06 million units, the National Association of Realtors said on Tuesday.
The recent slowdown in home sales has cut demand for loans to buy homes. The Mortgage Bankers Association's purchase loan index decreased 5.2 percent last week to 390.1 but was still 17 percent higher than a year ago.
Meanwhile, appetite to refinance continued to trend lower with mortgage rates hovering above their 45-year lows.
The Washington, D.C.-based group's mortgage refinance index dropped to 1,644.3 last week, down 13.8 percent from the previous week and down 63.8 percent from a year earlier.
Interest rates on 30-year fixed-rate loans, the most popular U.S. mortgage type, averaged 5.73 percent excluding fees last week, up 11 basis points from the prior week.