Mortgage Applications Decline as Refis Nosedive

Mortgage applications continued on a downward slope last week, with refinance volume falling to its lowest level in months, according to the ""Mortgage Bankers Association's"":http://mbaa.org/default.htm (MBA) Weekly Applications Survey.

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The survey's Market Composite Index, a measure of mortgage loan application volume, dropped 9.8 percent on a seasonally adjusted basis for the week ending May 17, MBA reported. Unadjusted, the index fell a full 10 percent compared to the previous week.

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The Refinance Index decreased 12 percent week-over-week--the fastest weekly drop this year, according to MBA. The refinance share of mortgage activity dropped 2 percentage points to 74 percent.

""Mortgage rates increased to their highest level since March last week, leading to the largest single week drop in refinance applications this year,"" said Mike Fratantoni, MBA's VP of research and economics. ""The refinance index has fallen almost 19 percent over the past two weeks and is back to its lowest level since late March. Purchase activity declined over the week but is still running about 10 percent above last year's pace at this time.""

At the same time, the seasonally adjusted Purchase Index saw a decline of 3 percent week-over-week. The unadjusted index fell 4 percent but still came up 10 percent higher than the same week in 2012.

The average contract interest rate for a 30-year fixed-rate mortgage with a conforming loan balance was 3.78 percent last week, according to MBA--an increase of 11 basis points from the previous survey.