Low Refinance Activity Brings Down Application Volume

Mortgage application volume dropped 4.6 percent for the week ending August 16, the ""Mortgage Bankers Association"":http://mbaa.org/ (MBA) reported in its Weekly Mortgage Applications Survey.

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Unadjusted, MBA's Market Composite Index declined 5 percent compared to the previous week.

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Refinances took a major tumble, with the Refinance Index seeing an 8 percent week-over-week decline. According to the association, the index has dropped 62.1 percent from the recent peak reached during the week ending May 3. The refinance share of total mortgage activity, meanwhile, fell to 62 percent from 63 percent the week prior.

While refinance activity decreased, purchase loan applications rose. The seasonally adjusted Purchase Index was up 1 percent week-over-week; however, the unadjusted index was down 0.4 percent (though 5 percent higher than the same week last year).

The decline in application volume was accompanied by a significant rise in interest rates. The average contract interest rate for a 30-year fixed-rate mortgage increased to 4.68 percent from 4.56 percent in the last survey. Points increased to 0.42 (including the origination fee) for 80 percent loan-to-value ratio loans.