By Kevin Chiu
A jump in mortgage rates quieted home mortgage applications as consumers came to grips with a slower housing market 
this week, according to the Mortgage Bankers Association. Refinancing and applications for new home financing were down.
Refinance applications dropped a whopping 16.6% from a week earlier, and consumers applied for fewer new home mortgages, 8.8%. The fall-off in mortgage financing came as mortgage rates on the 30-year fixed rate loan rose to an average of 4.33% on fully executed home loans, an eight basis point rise for the week alone.
The rate on the 15-year fixed rate loan saw an increase to 3.61% in the bankers’ survey, which accounts for about 75% of all home mortgages made during any week in the U.S. The seasonally adjusted purchase index is now at its lowest level since December 1996, showing signs that the once more active housing market has lost steam.
Home sales usually increase during the busy summer home buying season and then slow down once fall returns. The slump in sales, however, this year has been magnified by a hurting economy driven by high unemployment and a lack of consumer confidence.
Conventional mortgage activity slowed for the year, but the applications for government mortgages, including FHA loans swelled. The share of lower rate government mortgages are up 43.5% in the past three weeks as consumers shop for lower mortgage rates on home financing.
The drop in mortgage refinancing applications isn’t fully unexpected, with so many homeowners already refinancing their homes who have been able to qualify, but there are millions who have been unable to do so. The Obama administration may be announcing a new program in coming weeks allowing homeowners greater leeway to refinance their mortgages, including an increase on the loan-to-value allowed.
The average mortgage rate on the 5-year Treasury indexed adjustable rate loan also saw a hike for the week to 3.08% from 3.03%. Rates are expected to remain low for sometime as the Fed buys additional mortgage backed securities to spur on home lending.