NEW YORK (Reuters) - U.S. mortgage application activity recorded its steepest drop since December, retreating from an eight-week high, as various home borrowing costs held steady or rose modestly, according to Mortgage Bankers Association data released on Wednesday.
The Washington-based industry group said its measure on mortgage applications fell to 398.8 points in the week ended May 12 in a 4.1 percent decline from the prior week. This was the biggest weekly decrease since a 12.1 percent drop in the Dec. 23 week.
Interest rates on conforming 30-year fixed-rate mortgages were 4.23 percent for a third straight week, while average rates on other types of 30-year loans the MBA tracks were 0.01 to 0.02 percentage point higher than the previous week.
Mortgage rates have held in a tight ranges since their surge in step with bond yields last November following Donald Trump's U.S. presidential win.
"This is just another example of market participants – in this case prospective borrowers – being lulled to sleep by the range," Walt Schmidt, FTN Financial's head of mortgage strategy, wrote in a research note.
Trump's victory had spurred bets on rising interest rates if he and a Republican-controlled Congress can quickly enact tax reforms, looser regulations and infrastructure spending.
Their struggle to pass their economic agenda, however, has led investors to reconsider whether any major legislation will pass in 2017.
The decline in mortgage activity stemmed from decreases in applications for refinancing and purchasing a home.
MBA's seasonally adjusted gauge of applications to refinance an existing home loan declined 5.7 percent to 1,269.1 in its steepest weekly fall since December.
The share of refinancing fell to 41.1 percent of total applications, which was its smallest since September 2008 and was down from 41.9 percent the prior week.
The group's seasonally adjusted index of mortgage applications to buy a home, a proxy for future home sales, fell 2.7 percent to 243.6, scaling back from a 19-month high reached the prior week.
The average loan size for purchase applications reached $322,300 in the latest week, which is the largest ever since the MBA began its weekly application survey in 1990.
Reporting by Richard Leong; Editing by Chizu Nomiyama