U.S. mortgage activity falls to 3-1/2-month lows: MBA

NEW YORK (Reuters) - U.S. mortgage applications fell to their lowest in 3-1/2 months as some 30-year borrowing costs rose to their highest since mid-July, the Mortgage Bankers Association said on Wednesday.

The Washington-based group's seasonally adjusted weekly index of mortgage activity fell 4.6 percent to 400.3 in the week to Oct. 20. This was the lowest since 391.90 in the July 7 week.

Last week, the average interest rate on conforming 30-year fixed-rate mortgages rose to 4.18 percent from the prior week's 4.14 percent, which was the lowest since the week of July 14, the MBA said.

Conforming loans are those with balances of $424,100 or less that qualify for guarantees from federal mortgage agencies Fannie Mae and Freddie Mac .

Average interest rates on other types of home loans that the MBA tracks were anywhere from 2 basis points lower to 4 basis points higher than in the previous week.

Home borrowing costs have risen in step with higher bond yields on speculation that U.S. President Donald Trump would select someone who favors a faster pace of interest rate increases to head the Federal Reserve.

Optimism about imminent tax cuts from the federal government also had spurred a selloff in the bond market, raising benchmark 10-year Treasury note yields to a seven-month peak of 2.475 percent on Wednesday.

The MBA's seasonally adjusted gauge of purchase mortgage activity, a proxy for future home sales, fell 6.1 percent to 228.0 last week, the lowest in five weeks.

On Wednesday, the government said domestic new home sales unexpectedly jumped to a near 10-year high in September.

The group's seasonally adjusted index of mortgage refinancing activity slipped 3 percent to 1,357.6, the lowest since early July.

The share of refinancing requests of total applications grew to 49.5 percent from the previous week's 48.6 percent.

(Reporting by Richard Leong; Editing by James Dalgleish)

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