US home loan demand falls to lowest level this year

US mortgage applications fell last week to their lowest level this year despite a marked drop in interest rates, an industry trade group said on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended March 17 decreased 1.6 percent to 565.0 from the previous week's 574.4, its lowest level so far this year.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.31 percent, down 0.11 percentage point from the previous week's 6.42 percent level, a near four-year peak.
The 30-year fixed-rate mortgage, the industry benchmark, was also substantially above its 2005 low of 5.47 percent in late June of 2005 and was close to last year's high of 6.33 percent in the week of November 11.
The group's seasonally adjusted index of refinancing applications decreased 0.6 percent to 1,574.5 compared to 1,583.6 the previous week. A year earlier the index stood at 1,894.4.
The MBA's seasonally adjusted purchase mortgage index dropped 2.3 percent to 393.6 from the previous week's 403.0. The index was only a few points above its two-year low of 391.7 reached during the week ended February 10. The index was also below its year-ago level of 446.4.
The index, considered a timely gauge of US home sales, was also below its year-ago level of 446.4. Historically low mortgage rates have fuelled a five-year housing boom, helping support the US economy's recovery from recession despite uncertain business investment.
Despite last week's rate drop, most analysts say that mortgage rates are on the rise. While they may differ on whether or not there is a housing bubble, most agree that the market is now cooling off from its record run.
Fixed 15-year mortgage rates averaged 5.99 percent, down from 6.06 percent the previous week. Rates on one-year adjustable-rate mortgages (ARMs) increased to 5.68 percent from 5.64 percent.
The MBA's survey covers about 50 percent of all US retail residential mortgage originations. Respondents include mortgage bankers, commercial banks and thrifts.