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Plummeting Loan Applications Hit 15-Year Low

Rising mortgage rates led to 15-year lows for mortgage application volume last week, with lower purchases following uncertain macroeconomic activity and a rush to rentals by prospective first-time homebuyers.

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In releasing the ""Weekly Mortgage Applications Survey"":http://mbaa.org/NewsandMedia/PressCenter/78221.htm, the ""Mortgage Bankers Association"":http://mbaa.org/default.htm (MBA) found purchase applications plunging by 8.8 percent from the week earlier ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô the lowest on record since 1996.

The trade group reported declines in overall loan volume by 14.9 percent on both a seasonally adjusted and seasonally unadjusted basis.

Refinance loans also fell, hitting 16.6 percent in contrast with numbers from the week before, even while conventional purchases dropped by 11 percent.

The Government Purchase Index, a measure of applications for government-backed loans, likewise showed a 5.9-percent dip from the previous week.

Unadjusted purchases fell 8.6 percent from the week before, down 5.1 percent from purchases seen over the same period last year.

""Mike Fratantoni"":http://www.mbaa.org/files/SpeakersBureau/FrantantoniM.pdf, VP of single-family research and policy development with the MBA, tells _MReport_ that higher mortgage rates, seasonal factors, and young people drove down loan application volume.

""We're bouncing along on a very low level on the purchase side,"" he says, adding that the trade group ""did not adjust for Columbus Holiday and that may be one reason why we didn't think that enough of the market would close in terms of purchases.""

Purchase applications for federally insured loans went up by 3.3 percent on an unadjusted basis, alongside

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an upswing in purchase activity that ran up to 43.5 points ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô the highest on record since April this year.

The share of refinancing activity constricted by about 77 percent of total applications, down from 79 percent the previous week, even while the adjustable-rate mortgage (ARM) share of activity collapsed to 5.8 percent from 6 percent of overall application volume from the week before.

On a seasonally adjusted basis, the four-week moving average fell 2.36 percent, even while the same collapsed by 1.53 percent among purchase applications on a seasonally adjusted basis.

In line with declines in mortgage loan volume, contract interest rates for fixed-rate loans went up across the board, with the 30-year bouncing up to 4.33 percent, up from 4.25 percent, and the 15-year seeing a leap to 3.61 percent, up from 3.53 percent.

Interest rates for 30-year mortgages with jumbo loan balances inched forward to 4.64 percent, up from 4.59 percent, while rates for 30-year loans insured by the ""Federal Housing Administration"":http://www.fha.com/ jumped to 4.12 percent, up from 4.06 percent.

Contract interest rates for 5-year and 1-year adjustable-rate mortgages meanwhile bounded upward to crest at 3.08 percent, up from 3.03 percent.

Asked whether the plunge in applications fed into an MBA forecast for $900 billion originations over 2012, Fratantoni says that any such decline will stay ""consistent with drops in refinance activity├â┬ó├óÔÇÜ┬¼├é┬ª and we expect that this will result in a very high drop in refi volume.""

He says that homeownership is expected to continue down the slope of a downward revision as more young people become renters.

""Macro-economically, we're still treading water, and if people don't feel secure about their job situation, they won't be going out to buy homes,"" he says.

Ryan Sweet, a senior economist with ""Moody's Analytics"":http://www.wsainc.com/, says that more potential homebuyers continue to stay on the sidelines because of the staggering 9.1-percent unemployment rate.

""The one benefit we're seeing from lower mortgage rates is a pickup in refinancing activity,"" he adds. ""While some may spend"" their extra cash, ""others may opt to build a larger savings cushion.""

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.
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