Mortgage Applications Drop Sharply

The Mortgage Bankers Association (MBA) released its weekly report on mortgage applications this morning, noting a decline of 12.3% in the group's seasonally adjusted composite index, compared with last week's rise of 6.2%. Unadjusted, the composite index fell by 13%.

Surprisingly, interest rates rose last week, even though the Fed's announced purchases of agency mortgage-backed securities would have seemed to be a signal for lower rates. The rise in rates sharply curtailed refinancings.

Applications for refinancing fell by 14% (seasonally adjusted), while seasonally adjusted purchase applications decreased by 5% from the previous week. Unadjusted, the purchase index fell by 8% compared with the previous week and rose by 9% compared with the same week a year ago.

The refinancing rate fell by one point to 83% of all applications. About 97% of the applications were seeking fixed-rate loans, the same as last week's reading.

The average contract interest rate for a conforming 30-year fixed-rate mortgage decreased from 3.47%, the lowest rate in the 22-year history of the MBA survey, to 3.50%. The rate for a jumbo 30-year fixed-rate mortgage increased, from 3.77% to 3.73%, the lowest rate in the history of the survey. The average interest rate for a 15-year fixed-rate mortgage decreased from 2.85% to 2.83%, another record low.

The contract interest rate for a 5/1 adjustable rate mortgage increased from 2.63% to 2.61%.

The modest rise in the interest rate on 30-year conforming loans just does not seem like it would be enough to cause the large drop. More reasonably, it seems, is that mortgage shoppers are shopping for other things at this time of the year. The unadjusted drop of 13% appears to back this up.

Paul Ausick

Filed under: 24/7 Wall St. Wire, Housing, Research