Mortgage Apps Drop Sharply in Year-End Survey

Mortgage applications ended 2014 on a sour note, falling off drastically in what was a particularly slow year-end period.

Total mortgage application volumes, including both purchase loans and refinances, fell 9.1 percent over the two weeks ending January 2, the Mortgage Bankers Association (MBA) reported Wednesday. The results include adjustments for the Christmas and New Year's Day holidays.

While it's not uncommon for application numbers to decline near the end of the year as home shopping slows down, the most recent figures are just the latest in what has been a weak year for the mortgage market.

According to Capital Economics, applications for both home purchases and refinances dropped nearly 13 percent each, hovering around their lowest levels in nearly 20 years even as economic conditions improve.

"The further drop in 30-year mortgage interest rates, to within a whisker of 4 percent, as well as the rip-roaring performance of the labour market, are yet to be reflected in mortgage applications," said property economist Paul Diggle in a note to clients.

In the latest reading, MBA reported that refinance applications were down 12 percent from two weeks prior, sinking despite a drop in the average 30-year fixed rate to 4.01 percent. The group's seasonally adjusted measure of home purchase applications also fell, slipping 5 percent.

While overall activity was down in the last survey, government-insured lending picked up. According to MBA, applications for Federal Housing Administration (FHA) mortgages accounted for 9.3 percent of activity for the latest week, while applications for Veterans Affairs (VA) loans accounted for 10.7 percent. Unlike the other indices, those changes are compared to just the previous week.