Mortgage applications plummet 13.7%

• By Julianne Pepitone, CNNMoney.com staff reporter
• On 8:18 am EDT, Wednesday October 21, 2009

Mortgage applications plunged last week as rates ticked higher above 5%, an industry group said Wednesday, as the expiration of a home buyer tax credit drew nearer.

The Mortgage Bankers Association 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 the widely-used 30-year fixed mortgage 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's Wednesday report comes on the heels of other downbeat data from the U.S. housing market, which had until recently showed signs of stabilization from a major slump.

A report Tuesday showed initial construction of homes rose just 0.5% last month to 590,000, far less than expected. Last week, data showed foreclosure filings hit a record high in the third quarter. Another report predicted the national median home price will drop 11.3% by June 2010.

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

Rates for one-year adjustable rate mortgages, or ARMs, jumped to 6.86% from 6.71%.

Buzz up!