Another tumble in refinancing sent mortgage application volume down nearly 5 percent in April—though home purchase applications managed to squeak up for the second straight month.
According to monthly application data released by the Mortgage Bankers Association and compiled by Capital Economics, total application activity in April was down 4.8 percent month-over-month, slipping further from March’s 2.9 percent decline.
The entirety of the decline came from another drop in refinance application volumes, which were down 10.8 percent over the month, the biggest drop so far this year. Year-over-year, Capital Economics says refinance applications have fallen more than 80 percent.
“The very weak level of remortgaging is a reflection of the 100 basis points rise in mortgage interest rates last year,” remarked Paul Diggle, property economist for the research firm. “Further gradual gains in mortgage rates will ensure that remortgaging volumes remain very subdued.”
On the other hand, home purchase apps picked up an additional 4 percent after March’s 2.7 percent gain—the strongest improvement in 12 months and the first two-month period of consecutive gains in more than a year.
“Moreover,” Diggle noted, “all this came while 30-year mortgage interest rates actually ticked up by a few basis points.”
Taking the shine off that improvement is the Federal Reserve’s latest Senior Loan Officer Survey, which shows continued declines in mortgage demand.
With investor activity fizzling, Diggle says demand is going to have to pick up considerably if the recovery is going to sustain itself. However, he remains hopeful.
“The rise in mortgage applications for home purchase in April, alongside the recent pick-up in the Fed’s measure of the value of residential mortgage lending, are encouraging signs that mortgage lending is increasing. Admittedly, none of this changes the fact that mortgage lending is still very subdued in a longer term context,” he said. “But we think that it is a sign of things to come.”