Mortgage Applications Driven Down by Rate Spike

By Associated Press

February 09, 2011 at 11:45 AM

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NEW YORK (AP) — The number of people applying for a mortgage dropped last week as rates jumped.

The Mortgage Bankers Association said Wednesday its overall mortgage application index fell 5.5% from the previous week. The refinance index decreased 7.7%, while the purchase index slipped 1.4%.

Refinances made up two-thirds of mortgage activity last week, down from 69.3%. That marks the lowest share since May of last year.

Rates on fixed mortgages climbed last week as more upbeat economic indicators convinced investors to sell off Treasury bonds. That sent Treasury yields higher; mortgage rates tend to track the yield on the 10-year Treasury note.

The rate on the 30-year fixed mortgage increased to 5.13% from 4.81% last week, according to the survey. The rate on the 15-year fixed loan, a popular option for refinancing, rose to 4.29% from 4.13%.

Mortgage rates hit the lowest level in decades in November on concerns over a sluggish economy. Investors seek safer investments when the economy appears rocky.

The Mortgage Bankers Association's survey covers more than 50% of all applications nationwide.

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