The battered US housing market has yet to reach bottom, with figures released today revealing mortgage applications fell to an eight-year low last week as Americans delay or abandon purchases and fewer people seek to refinance their loans.

The Mortgage Bankers Association (MBA) application index fell to 419.3 during the week ended August 15, its lowest level since December 2000, and a 1.5 per cent slide from the prior week. Application volume is down 61 per cent from its peak in February.

The MBA’s index peaked at 1,856.7 during the week ending May 30, 2003, at the height of the housing boom.

The share of applicants seeking refinancing also fell down to 34.8 per cent, the lowest since July 2006, from 35.2 per cent the prior week.

Higher borrowing costs, stricter regulations and falling property values are preventing owners from tapping into home equity, according to analysts.

The fall in application volume is the latest sign of a struggling housing market. On Tuesday, a Commerce Department report showed construction of homes and apartments fell in July to 6.47 per cent - the lowest level in more than 17 years.

Application volume fell despite a drop in interest rates. The average rate for traditional, 30-year fixed-rate mortgages fell to 6.47 percent during the week ended Aug. 15, from 6.57 percent the previous week.

The average rate for 15-year fixed-rate mortgages, often a popular option for refinancing a home, fell to 5.99 per cent from 6.17 per cent. The average rate for one-year adjustable-rate mortgages fell to 7.07 per cent from 7.15 per cent.

“The biggest threat to the economy is the fragility in the financial system, which stems largely from the deteriorating performance of residential real estate credit,'' Michael Feroli, an economist at JPMorgan Chase & Co in New York. "That performance is unlikely to improve until there are signs of some stabilization in house prices.”

The MBA survey provides a snapshot of mortgage lending activity among mortgage bankers, commercial banks and thrifts. It covers about 50 percent of all residential retail mortgage originations each week.

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