Mortgage Applications Decline Despite Drop in Rates

August 29 2007 CNBC.com Mortgage applications in the U.S. declined to a four-week low as the rate on one-year adjustable loans jumped by the most ever. The Mortgage Bankers Association's index of applications to buy a home or refinance a loan fell 4 percent last week to 615.2 from 641.1. The group's purchase and refinancing gauges each decreased for a second week.Banks may be jacking up short-term rates to dissuade buyers from choosing riskier mortgages as defaults on subprime loans climb. The housing slump will worsen as banks restrict credit availability and falling real-estate prices prevent owners from tapping home equity for extra spending money, economists said.

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