Mortgage applications tumbled to their lowest level in nearly a year as a six-week-long rise in interest rates took a significant toll on demand, an industry group said on Wednesday.
The Mortgage Bankers Association on Wednesday said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended December 17 decreased 18.6 percent, reaching its lowest level since the week ended January 1.
The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was down 9.8 percent.
The drop in demand last week was largely a reflection of the lack of interest by homeowners to refinance their existing home loans.
The MBA's seasonally adjusted index of refinancing applications decreased 24.6 percent, reaching its lowest level since the week ended April 30.
Refinance application volume dropped sharply this week as mortgage rates held near six month highs, Michael Fratantoni, MBA's Vice President of Research and Economics, said in a statement.
Purchase applications fell for a second week, with the level of applications little changed over the past month, indicating that home sales are likely to remain relatively weak over the next few months, he said.
The MBA's seasonally adjusted purchase index, a tentative early indicator of home sales, decreased 2.5 percent, reaching its lowest since the week ended November 12.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.85 percent, up 0.01 percentage point from the previous week. Interest rates, however, were below their year-ago level of 4.92 percent.
Rising U.S. Treasury yields, on expectations that consumers pending and tax policy would boost growth, have helped push mortgage rates higher.
The MBA said fixed 15-year mortgage rates averaged 4.22 percent, up from the previous week's 4.21 percent.
The MBA's survey has been conducted weekly since 1990.
More insight into the state of the U.S. housing market will emerge later on Wednesday when the National Association of Realtors releases November existing home sales data. On Thursday the Commerce Department releases November new home sales data.