Mortgage Activity Drops; Rates Rise

(Mortgage activity report updated with analyst commentary and data on existing-home sales.)

WASHINGTON (TheStreet) -- Mortgage applications fell sharply last week as mortgage rates pushed higher for the sixth straight week.

The volume of mortgage loan applications decreased 18.6% on a seasonally adjusted basis in the week ending Dec. 17, the Mortgage Bankers Association said early Wednesday. Mortgage activity fell 2.3% in the prior week.

Refinancing application volume dropped 24.6% from the previous week. It was the sixth consecutive weekly drop in refinancing activity after falling 0.7% in the prior week. Home-purchase loan applications fell 2.5% in the week, on a seasonally adjusted basis, after ticking 5% lower a week earlier. On an unadjusted basis, the MBA's purchase index was 8.4% lower than in the year-earlier week.

>>Homebuilder Stocks: Behind the Numbers

A total of 72.3% of all loan applications last week were for refinancing existing mortgages, down from a 76.7% share in the prior week.

"Refinance application volume dropped sharply this week as mortgage rates held near six month highs," said Michael Fratantoni, MBA's vice president of research and economics. "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."

The average rate on a 30-year fixed mortgage edged up to 4.85%, from 4.84% in the prior week. It was the sixth consecutive weekly increase and approached six-month highs. Still, mortgage rates remain near all-time lows.

Rising mortgage rates, which some market watchers view as deterring home buying activity, are not likely to continue to rise, but are also unlikely to return to record lows seen in recent months, according to Paul Anastos, president of Mass.-based Mortgage Master.

He told TheStreet that better-than-expected existing-home sales data for November, which came out earlier Wednesday, was encouraging.

"We can draw a conclusion that potential buyers are seeing a relationship between still-low mortgage rates and favorable prices to buy homes...it comes down to [perceptions of] affordability."