Mortgage Applications Rate Lowest Since November

With mortgage rates the highest they have been all year, and borrower costs rising, the housing crisis seems to be deepening.

The number of people applying for U.S. mortgages continues to fall, hitting a level lowest since November last week. According to the Mortgage Bankers Association, application rates have fallen over 7% since the previous week, creating an overall decrease of 16% decrease in the index of applications for purchase or refinancing.

According to Tom Porcelli, senior economist at RBC Capital Markets in New York City, higher rates are directly to blame. “Higher mortgage rates will keep ‘refi’ activity under pressure. That removes a source of what some had hoped would be an added kicker to consumer spending,” he says.

Average interest rates for 30-year fixed-rate mortgages are now at 5.57%, and rates for 15-year fixed-rate mortgages is 5.1%.

At least 60% of the business bankers are seeing these days is in the refinance area rather than new sales.

Of course, the highest rate of unemployment in 25 years isn’t helping, either. Mark Goldman, a real estate lecturer and mortgage broker, says he’s not optimistic about this year or 2010.

“Employment is still bad, wages are still low, interest rates are up. That’s going to hurt the housing market,” he says, adding that the rise in mortgage rates cuts buyer purchasing power by 10%.

President Obama has noted that the unemployment rate may rise to 10% nationally, and that he is creating an agency to oversee mortgages as well as other consumer products, such as credit cards. The federal tax credit of up to $8,000 for first-time home buyers also remains in effect.