U.S. MBA Mortgage Applications Index Fell 19 Percent Last Week

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July 1 (Bloomberg) -- Mortgage applications in the U.S. fell last week by the most since February as refinancing slumped to the lowest level in seven months.

The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan dropped 19 percent to 444.8 in the week ended June 26 from 548.2 the prior week. The group’s refinancing gauge declined 30 percent, while the index of purchases fell 4.5 percent.

Recent gains in borrowing costs have discouraged homeowners from refinancing, while rising foreclosures thwart builders’ efforts to clear the glut of unsold houses. Still, other reports indicate the housing market has begun to stabilize as lower home values attract buyers still able to qualify for credit.

“The worst is behind us but we’re a long ways off from a recovery in housing,” said Mark Vitner, a senior economist at Wachovia Corp. in Charlotte, North Carolina. “Inventories are still elevated. We’re not expecting any strength in housing until the second half of 2010.”

The mortgage bankers’ refinancing gauge decreased to 1,482.2, the lowest reading since November, from 2,116.3 the previous week, today’s report showed. The purchase index fell to 267.7 last week from a two-month high of 280.3.

The share of applicants seeking to refinance loans plunged to 46.4 percent of total applications last week from 54 percent.

The average rate on a 30-year fixed-rate loan fell to 5.34 percent from 5.44 percent the prior week. The rate reached 4.61 percent at the end of March, the lowest level since the group’s records began in 1990.

Mortgage Rates

At the current 30-year rate, monthly borrowing costs for each $100,000 of a loan would be $558, or about $62 less than the same week a year earlier, when the rate was 6.33 percent.

The average rate on a 15-year fixed mortgage dropped to 4.81 percent from 4.93 percent the prior week. The rate on a one-year adjustable mortgage decreased to 6.52 percent last week from 6.54 percent.

Real-estate companies are seeing some signs the slump is letting up even as sales remain depressed. KB Home, the Los Angeles-based homebuilder that targets first-time buyers, reported a narrower second-quarter loss as the company cut expenses faster than revenue dropped.

“Although key economic indicators remain mixed, we are beginning to see signs that some negative housing market trends may be moderating,” Chief Executive Officer Jeffrey Mezger said in a statement last week.

The Washington-based Mortgage Bankers Association’s loan survey, compiled every week, covers about half of all U.S. retail residential mortgage originations.