Refinancing of Home mortgages fell last week

Applications for U.S. residential mortgages fell last week as rising interest rates deterred borrowers from refinancing their existing home loans and taking out new ones, an industry trade group said on Wednesday.

The Mortgage Bankers Association said its index of total mortgage applications for home purchase and refinancing loans fell 6.6 percent to 721.2 in the week ended September 23. The index rose 1.5 percent in the previous week.

The volume of refinancing and purchase loans declined -- the first time both sectors fell simultaneously in a month, according to MBA figures.

The purchase index fell 3.4 percent to 483.1, adding to the previous week's 2.6 percent loss. The refinancing index fell 10.5 percent to 2,106.6. reversing the previous week's 7.0 percent gain.

The indexes were all seasonally adjusted, the MBA said.

Fixed 30-year mortgage rates rose 4 basis points, or 0.04 of a percentage point, to an average of 5.85 percent, excluding fees, compared with 5.81 percent in the previous week and 5.64 percent in early September.

While the fixed 30-year mortgage rate is below its 2005 high of 6.08 percent reached in late March, it is above the 2005 low of 5.47 percent of late June. It is also higher than where it stood a year ago when the rate was 5.64 percent.

Fixed 15-year mortgage rates last week averaged 5.44 percent, up from 5.38 percent the previous week. Rates on one-year adjustable-rate mortgages (ARMs) increased to 5.02 percent from 4.94 percent.

ARM ACTIVITY FALLS

With ARMs, low initial payments allow borrowers to buy homes they may not be able to afford with a fixed-rate loan.

Despite the steady climb of fixed mortgage interest rates over the past month, demand for ARMs dropped last week. They accounted for 28.8 percent of total applications, down from 29.8 percent the previous week.

ARM demand reached a 2005 high of 36.6 percent in late March.

Refinancings also decreased as a percentage of all mortgage applications, falling to 43.9 percent from 45.6 percent, the MBA said.

The group's survey covers about 50 percent of all U.S. retail residential mortgage originations. Respondents include mortgage bankers, commercial banks and thrifts.

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.