U.S. mortgage application demand slid to the lowest level since
mid-March, driven by a drop in requests to refinance loans even as
borrowing costs dipped toward record lows last week, the Mortgage
Bankers Association said on Wednesday.

Applications for loans to buy homes rose marginally in the week
ended May 8, holding slightly elevated levels in the midst of the
keenly watched spring selling season.

U.S. housing continues to stumble in its deepest slump since the Great Depression.

But near record-low mortgage rates and a 30 percent price drop by
some measures from the 2006 peak are luring buyers -- mostly those who
benefit from a first-time buyer federal tax credit and those secure in
their jobs.

The Mortgage Bankers Association said its applications index that
includes purchase and refinance loans fell 8.6 percent to a seasonally
adjusted 895.6 last week.

While refinance applications fell 11.2 percent to 4,588.6, the
lowest since mid-February, the trade group's purchase loan index
climbed 0.5 percent to 265.7. The last time purchase requests were
higher was in the first week of April.

Borrowing costs bumped around near record lows.

The average 30-year mortgage rate slipped 0.03 percentage point to
4.76 percent and hovered slightly above the low of 4.61 percent set in
late March.

A year ago, the rate was more than a percentage point higher at 5.82 percent.

Refinances have dominated the mortgage application figures steadily
over the last three or four months. We're still doing such overwhelming
refinance application volume, but the number of units that we are
seeing on the purchase side is encouraging, said Paul Anastos, vice
president of Mortgage Master, Inc, an independent lender in Walpole,

Still, low rates have not yet been enough to overcome fears of job
loss with unemployment at its highest rate in more than a quarter

I don't feel like at this point it's so much rate driven, Anastos
said in an interview on Tuesday. If you look at the prospects of
buying, the rates make housing very affordable. To me, it's more of an
issue of consumer confidence.

Refinancings represented about 72 percent of all mortgage applications last week, the trade group said.

Many potential buyers are still grappling with weighty concerns.

Will I have a job, will I be able to make payments, has the economy
bottomed out?, Anastos said are key questions borrowers are asking. I
see a slight improvement year over year if I look at it globally, but I
haven't seen enough to really let me feel like we're out of the woods.

A recovery in the U.S. housing market could be as much as two years
away, Sheila Bair, chairman of the Federal Deposit Insurance Corp, said
in remarks prepared for a National Association of Realtors gathering.