MBA weekly mortgage index falls 1.9%, rates at 5-month high

Mortgage applications decreased last week, as an increase in borrowing costs discouraged mortgage refinancing activity, the Mortgage Bankers Association announced Wednesday.

The Mortgage Bankers Association's composite index of applications declined 1.9% on a seasonally-adjusted basis to 671.7 from last week's 684.9.

The Refinance Index decreased 4.7% to 2,448.2 from 2569.0 the previous week and the seasonally adjusted Purchase Index increased 1.6% to 368.8 from 363.1 one week earlier.

Mortgage rates rise

Meanwhile, the average rate for a 30-year fixed loan rose to 6.37% from 5.98% the prior week; 30-year rates are at five-month high. The average rate for a 15-year fixed mortgage increased to 5.72% from 5.26%.

Also, the share of applications that involved a refinance declined to 50.6% from 52%.

Economic Analysis: A large increase in conventional mortgage rates -- the average rate rose about 40 basis points in one week. The U.S. Federal Reserve has cut benchmark, short-term interest rates by 225 basis points, but mortgage rates have not fallen, they've risen. That's a tell-tale sign that banks remain concerned about their portfolios and about sluggish housing market conditions. For the housing sector to regain its sea legs, rates must move toward the lower-end of their 10-year range, which would increase housing demand by lowering monthly payments for purchases.