Rate rise dampens mortgage refinancings

A rise in U.S. mortgage rates to their highest level of the year slowed requests for home loan refinancings last week, an industry survey found, but demand for loans to buy homes remained robust.

The Mortgage Bankers Association said on Wednesday its measure of demand for mortgage refinancings, the refinancing index, fell 5.8 percent to 2,403.0 in the week ended April 23.

Average interest rates on 30-year mortgages rose 17 basis points to 6.01 percent, the MBA said.

The MBA's market index, a measure of overall lending activity, rose 0.5 percent to 748.0 and the group's purchase index, a gauge of requests for loans to buy homes, rose by 6.8 percent to 463.5 from 434.1 in the prior week.

Earlier this week, reports showed new home sales surged 8.9 percent in March because of low mortgage rates, while sales of existing homes in March jumped 5.7 percent, more than expected to their second highest pace on record.

However, that fierce activity is expected to cool in coming months.

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"What we are seeing here is the peak in home sales for several months to come," said Chris Low, chief economist at FTN Financial on Tuesday before the report was released. "Sales may hold up in March just because there were people moving toward a contract in late February. After that, I expect sales to weaken by 5 percent to 10 percent fairly quickly."

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Looking ahead, Low said some demand for loan refinancings could trickle in despite a rise in borrowing costs for home owners.

"There are fewer and fewer refi applications coming in. There may be a few people looking to move out of ARMs (adjustable rate mortgages) into fixed rate loans. That likely will be limited to the most sophisticated home owners," said FTN's Low.