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Mortgage Applications Down Despite Record-Low Rates

Mortgage applications tumbled 4.8% on a seasonally adjusted basis from the previous week, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 25.

Furthermore, there was a drop of 5% from the previous week on an unadjusted basis, while the Refinance Index plummeted 7% from the week before. From the same week a year ago, it ratcheted up 52%. And the drops continued, with a 2% decrease in the seasonally adjusted Purchase Index from a week earlier, while the unadjusted Purchase Index descended 2% from week before. Shifting gears, the index bounced 22% from the same week the previous year.

Mortgage rates decreased last week, with the 30-year fixed rate mortgage declining five basis points to 3.05%—the lowest in MBA's survey, said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "Despite the decline in rates, refinances fell over 6%, fueled by a 9% drop in conventional refinance applications."

Purchase applications also decreased last week, but activity was still at a strong year over-year growth rate of 22%, he added. “Even as pent-up demand from earlier in the year wanes, there continues to be action in the higher price tiers, with the average loan balance remaining close to an all time survey high."

Meantime, there was a 63.3 fall off of total applications in the refinance share of mortgage activity from 64.3% the week before. Stemming the tide, remaining unchanged at 2.2% of total applications was the adjustable-rate mortgage share of activity. Similarly, there was an 11.4% uptick from 10.1% the week before in the FHA share of total applications. Conversely, the VA share of total applications tumbled to 11.9% from 12.0 % the week prior.

There was a boost in the 30-year-fixed-rate-mortgage, which averaged 2.93% with an average 0.8 point for the week ending September 3, according to FreddleMac. It’s an uptick from last week, when it averaged 2.91%. The 30-year FRM averaged 3.49% a year ago at this time, TheMReport.com reported.

Meantime, the 15-year fixed-rate mortgage averaged 2.42% with an average 0.8 point. It’s a descent from the previous week’s average of 2.46%; at this juncture a year ago, the 15-year FRM averaged 3.00%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.93% with an average 0.2 point—a spike from the previous week’s average, 2.91%. The 5-year ARM averaged 3.30% from this point a year ago.

“Mortgage rates have remained effectively flat or at near record lows for the last month,” said Sam Khater, Freddie Mac’s Chief Economist. “However, there are some interesting compositional shifts as the 10-year Treasury rate has increased modestly over the past month while mortgage spreads have declined. Spreads may decline even further but the rise in Treasury rates will make it difficult for mortgage rates to fall much more over the next few weeks.”

The MBA's weekly survey covers 75% of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100.

About Author: Chuck Green

Chuck Green has contributed to the Wall Street Journal, Washington Post, Los Angeles Times, San Francisco Chronicle, Chicago Tribune and others covering various industries, including real estate, business and banking, technology, and sports

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