Mortgage Applications Plunge on Higher Rates

Washington, DC, Oct. 21, 2009--Mortgage applications fell sharply last week as rates ticked higher above 5%, according to the Mortgage Bankers Association.

MBA said its index of mortgage application volume fell 13.7% in the week ended Oct. 16 from the prior week.

The decline in activity came as rates on 30-year fixed mortgages increased to 5.07% from 5.02%, according to the MBA. The week's adjustments included the Columbus Day holiday.

Uncertainty about a possible extension and expansion of an $8,000 tax credit for first-time homebuyers may be hampering the housing recovery. The tax credit now can be claimed by anyone buying a home who has not owned one for three years and who closes the deal by Nov. 30.

The MBA said refinancing applications also fell, by 16.8% from the previous week. The purchase index, a measure of applications at mortgage lenders, declined 16.7% last week.

The MBA report also showed the average rate for 15-year fixed-rate mortgages rose to 4.51% from 4.44%.