Mortgage rates in the U.S. rose for
the first time in four weeks, pushing borrowing costs up from
the lowest in more than half a century as a faltering economy
holds back home purchases.

The average rate for a 30-year loan increased to 4.22
percent in the week ended today from 4.15 percent, according to
Freddie Mac. The 15-year rate rose to 3.44 percent from 3.36
percent a week ago, the McLean, Virginia-based mortgage-finance
company said in a statement today.

Loan applications for home purchases fell last week to the
lowest in more than 14 years even as mortgage rates tumbled.
Buyers are remaining on the sidelines as the unemployment rate
sticks above 9 percent. Volatility in stock markets this month,
spurred by concerns that the global economic recovery is
weakening, have also hurt demand, according to David W. Berson,
chief economist for PMI Group Inc.

“Low mortgage rates are helpful,” Berson said in a
telephone interview. “But the volatility in the financial
markets is having a significant impact on the confidence of
potential home buyers.”

The Mortgage Bankers Association’s index of purchase
applications dropped 5.7 percent in the week ended Aug. 19 to
the lowest level since December 1996, the Washington-based trade
group said yesterday. The refinancing gauge fell 1.7 percent
while the share of applicants seeking to reduce their monthly
payments climbed to 79.8 percent, the largest in nine months.

Last week’s 30-year rate was the lowest in Freddie Mac
records going back to 1971. Data from the Bureau of Economic
Research measuring Federal Housing Administration loans indicate
that rate was the lowest since the 1950s, said Chad Wandler, a
spokesman for Freddie Mac.

Home prices in the U.S. fell 5.9 percent in the second
quarter from a year earlier, the biggest decline since 2009, the
Federal Housing Finance Agency said yesterday.

New-home purchases decreased 0.7 percent to an annual rate
of 298,000 in July, the lowest level in five months, the
Commerce Department said this week. Sales of previously owned
homes dropped 3.5 percent in July to a 4.67 million annual rate,
the weakest since November, the National Association of Realtors
said Aug. 18.

To contact the reporter on this story:
Prashant Gopal in New York at
pgopal2@bloomberg.net

To contact the editor responsible for this story:
Kara Wetzel at
kwetzel@bloomberg.net