By Richard Leong
NEW YORK (Reuters) - U.S. mortgage applications recorded their steepest weekly drop since December on a pickup in borrowing costs and Hurricane Irma's impact on Florida, the Mortgage Bankers Association said on Wednesday.
The Washington-based group's seasonally adjusted weekly index on mortgage activity declined 9.7 percent to 417.5 in the week ended Sept. 15, its biggest decrease since a 12.1 percent fall in the Dec. 23, 2016.
The drop reversed the preceding week's 9.9 percent increase which was the biggest in 14 months.
"The decline in application volume last week was influenced by a rise in rates, the ongoing impact of the hurricanes on Florida and Texas, and a potential slowdown following the Labor Day holiday week," MBA economist Joel Kan said in a statement.
Last week, the average interest rate on conforming 30-year fixed-rate mortgages edged up to 4.04 percent from the prior week's 4.03 percent, which was the lowest since November, the MBA said.
Conforming loans are those with balances of $424,100 or less that qualify for guarantees from federal mortgage agencies Fannie Mae (PK:FNMA) and Freddie Mac (PK:FMCC).
Average interest rates on other types of home loans that the MBA tracks were anywhere from 2 basis points lower to 5 basis points higher than in the previous week.
Borrowing costs rose from nine-month lows in step with higher Treasury yields as investors pared their bond holdings due to stronger-than-forecast inflation data in August and reduced anxiety about the degree of slower economic growth due to Irma and Hurricane Harvey, Kan said.
The MBA's seasonally adjusted gauge on purchase mortgage activity, a proxy on future home sales, fell 10.8 percent from a near three-month peak to 224.7 in the latest week.
The group's seasonally adjusted index on mortgage refinancing activity retreated from a near nine-month peak, falling 8.5 percent to 1,497.8.
The share of refinancing requests versus total applications grew to 52.1 percent from the prior week's 51.0 percent.
Meanwhile, mortgage activity in Texas rebounded last week, rising 27 percent, which was not adjusted for seasonal factors, Kan said.
The level of applications in Texas has not fully recovered after it was severely depressed the prior two weeks by disruptions from Harvey.
On the other hand, home loan applications in Florida fell for a second week, down 22 percent from the prior week due to Irma.
Excluding Texas and Florida, total mortgage applications were up 13 percent last week on an unadjusted basis, according to Kan.
U.S. mortgages: http://tmsnrt.rs/2s0Nzco