Mortgage Applications Drop

By:
Kara Johnson | January 06, 2010

Mortgage applications fell sharply just before Christmas, as rising interest rates seem to have dampened consumer interest in mortgage refinancing.

New mortgage applications fell 22.8 percent the week ending Dec. 25, according to figures released today by the Mortgage Bankers Association. The numbers were adjusted both for seasonal factors and the shortened Christmas holiday week; in raw numbers, applications fell 46.9 percent.
 
Applications remained flat the following week, increasing 0.4 percent the week ending Jan. 1. The MBA did not release figure last week because its offices were closed for the holidays.
 
Refinance applications fell 30.5 percent the week ending Dec. 25 and another 1.4 percent the following week, as average rates on 30-year fixed-rate loans continued to rise. The survey’s average 30-year rate hit 5.18 percent for the week ending Jan. 1, up from 5.08 percent the week ending Dec. 25.
 
The survey’s 30-year fixed rate average has risen nearly four-tenths of a point over the past month, up from 4.79 percent the week ending Dec. 2, when 30-year rates hit their lowest point since mid-May.
 

Home purchase applications holding steady

 
Applications for home purchase mortgages fared better than refinances the past two weeks. The MBA’s seasonally adjusted Purchase Index fell only 4.0 percent the week ending Dec. 25 and rose 3.6 percent the week ending Jan. 1. Home purchase applications tend to be less susceptible to fluctuations in interest rates because of the fairly long lead time involved in purchasing a home, whereas homeowners seeking refinances have considerably more flexibility as to the timing of a loan.
 
Refinance applications made up 68.2 percent of all mortgage activity the week ending Jan. 1, down from 72.1 percent one month earlier the week ending Dec. 2. By contrast, refinances topped 80 percent of all mortgage applications at the peak of last spring’s refinancing frenzy, when 30-year rates reached all-time lows, falling as low as 4.61 percent in the MBA survey.
 
Those days of ultra-low rates are unlikely to return; most analysts expect interest rates to continue to rise moderately this year as the Federal Reserve winds down its support for programs to ease credit.
 
Rates on 15-year fixed rate mortgages were up sharply as well; average contract rates hit 4.57 percent the week ending Dec. 25, up from 4.37 percent the week before, and continued up to 4.62 percent the week ending Jan. 1.
 
Average points paid for the week ending Jan. 1 were 1.28 on 30-year loans and 0.98 on 15-year loans. No data was provided for adjustable rate mortgages.

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