Mortgage Applications Slip

Mortgage loan applications fell by 5.7% last week from the prior week, the Mortgage Bankers Association reported.

Home purchase loans dropped by 3.5% on a seasonally adjusted basis, while refinance mortgages declined by 8.3% in the week ended Nov. 19.

Compared to the same week one year earlier, overall applications were down 8% -- even though rates on 30-year and 15-year fixed rate mortgages were about the same for both periods.

Last year at this time, the mortgage market was seen as robust because interest rates had taken a big dip around Veteran's Day. This year, long-term rates have been gradually rising in tandem with yield on the 10-year Treasury bond.

Last week the average contract interest rate for 30-year, fixed-rate mortgages was 5.64%, with points of 1.36% for 80% loan-to-value ratio mortgages. The average rate for 15-year, fixed-rate mortgages was 5.08%, with points of 1.23% for 80% loan-to-value mortgages.

At this time last year, the average 30-year, fixed-rate loan carried an interest rate of 5.73% and the average 15-year, fixed-rate loan had a rate of 5.07%.

The noticeable difference in interest rates between this year and last can be seen in adjustable rate mortgages, or ARMs. Rates on ARMs are tied closely to the short-term interest rates set by the Federal Reserve, which raised the federal funds rate on Nov. 10 by a quarter of a point, the fourth increase since June.

The average contract interest rate for a one-year ARM last week increased to 4.13% from 3.89% a week earlier, with points rising to 0.99% from 0.97% the previous week for 80% loan-to-value mortgages.

One year ago, by comparison, the average interest rate on a one-year ARM was 3.59%.