Mortgage activity fell as interest rates saw a hike last week on signs of a weaker economy and trouble related to the U.S. budget debacle, according to the Mortgage Bankers Association. The composite index, a combination of refinancing and new home mortgage applications had a fall of 5% from the prior week as an increasing number of homeowners put off refinancing.
The seasonally adjusted refinance index dropped 5.5%, while the purchase index fell just 3.8%. The rate on a 30-year fixed mortgage rose to an average of 4.57% on fully executed contracts from 4.54% a week earlier. The average interest rate on a fixed 15-year loan barely moved, increasing a single basis point to 3.67% for the week.
Delays and headline news pressures over the debate in Washington, D.C. on the U.S. budget debacle have taken Americans away from concentrating on many other issues, including the possibility of refinancing homes or making home purchases in many cases.
The delay in Congress amid bitter partisan bickering is creating doubts about any sort of economic recovery with unemployment at the highest point it has been in a generation with more than 14-million Americans out of work.
Home sales in many regions of the U.S., however, show some signs of improvement with lower prices and historically low mortgage interest rates, despite the slim hike in rates this last week . Home prices are down an average of at least 50% from the markets peak high in almost all of the U.S. and substantially lower in areas that have been the hardest hit by the foreclosure crisis.
Survey after survey shows that consumers are increasingly concerned about the economy, which indicates many do not have the confidence to make decisions on major purchase decisions like buying a home, a car or a major appliance. However, historically those who usually make big purchases during the most severe down times do the best when it comes to reselling their homes, and reap the highest profit.
Adjustable rate mortgage activity increased during the week to 6.1% from 5.8% of all mortgage applications a week earlier.