Mortgage Activity Slows Again

Updated from 9:25 a.m.

Mortgage-loan applications dropped sharply and interest rates crept up during the holiday-shortened week ended June 4.

The total number of mortgage applications decreased by 8.9% from the previous week on a seasonally adjusted basis, according to the Mortgage Bankers Association, a trade group. Applications were down 68% from the same period a year ago.

The number of homeowners refinancing dropped to the lowest level in more than two years and was just 32.6% of all applications, down from 34.3% the week before. In addition, the index used to measure refinancing hit a low not seen since April 19, 2002, and refinancing deals were down 86% from their record high, set exactly one year ago, the group reported.

The national average rate for a 30-year mortgage rose by a hair last week, breaking a three-week run of mild declines. Long-term rates rose to 6.25% from 6.24% the week before, the MBA said. Rates were up from the 5.26% average for the same period a year ago, according to Freddie Mac surveys.

Also, 15-year fixed-rate mortgages rose to 5.63% from 5.59% the week before. The average one-year adjustable rate mortgage rose to 3.94% from 3.85% the week before. Rates for 15-year mortgages were up from 4.66% in the same period last year, and one-year adjustable rates were up from 3.59% from the year-ago period.

The Federal Reserve Board is widely expected to raise short-term interest rates by at least 25 basis points, or a quarter of one percentage point, at its June 30 meeting.

Jerry Grad, manager of the Atlanta office of Allied Home Mortgage, said: "A quarter of a percent or a half a percent point isn't going to mean much," adding that rising housing prices in many areas of the country will still prompt many buyers to act, even with slightly higher rates in place. "Values are still going up, so either you buy something now or you're going to pay more for it down the road," said Grad.