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A surge in mortgage interest rates to the highest level in two years dampened demand for mortgage applications last week. (AP Photo)

Home loan rates hit highest level in two years

A surge in mortgage interest rates to the highest level in two years dampened demand for mortgage applications last week, the Mortgage Bankers Association reported in its weekly survey covering 75 percent of the residential mortgage market.

For the ninth consecutive week, 30-year fixed-rate mortgages rose, averaging 4.68 percent for the week ending July 5. It was the highest average since July 2011. However, rates still remain low by historical averages.

During the week, loan requests for home purchases dropped 3.1 percent, the second consecutive week posting declines, the MBA reported. Meanwhile, refinancing applications dropped 4.4 percent last week. Overall, the MBA's index of mortgage application activity, which includes refinancing and home purchase demand, dropped 4 percent.

Meanwhile, more homebuyers are reaching deeper into their pockets to make larger down payments, according to a new survey by LendingTree of 600 buyers.

Sixty-four percent of prospective buyers say they expect mortgage rates to rise, and 68 percent say they expect home prices to rise in the next 12 months, according the LendingTree survey. That has prompted 57 percent of respondents to say they plan to make a down payment of 15 percent or more on their home purchase.

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