Mortgage Applications to Buy Homes Show Modest Increase

By:: Kara Johnson | September 08, 2010

Mortgage applications to buy homes inched upward last week, as the housing market struggles to regain its footing following the end of the homebuyer tax credit program.

Applications for mortgages to buy homes increased a seasonally adjusted 6.3 percent last week, according to today’s Mortgage Bankers Association weekly survey, to their highest level since May. Even so, activity remains almost 39 percent below the level of the same week one year ago.

Purchase applications have risen in most recent weeks, but weakly – the four-week moving average is up only 1.3 percent. Purchase applications dropped 35 percent in the four weeks following the April 30 deadline for the tax credit and have come back only slightly since then.

Meanwhile, refinance applications declined for the first time in six weeks, as fixed-rate mortgages rose from record lows. Refinance applications were down a seasonally adjusted 3.1 percent for the week, although interest in refinance activity remains high – refinances continue to make up four-fifths of all mortgage applications, and have increased an average of 5.0 percent over the past four weeks.

The decline in refinances may be due to increases in average rates for both 30- and 15-year fixed-rate mortgages. The MBA reported that the average rate on 30-year loans increased to 4.50 percent, up from 4.43 the week before, while the average on 15-year loans rose to 4.00 percent, up from 3.88 percent the week before.

Ironically, the effective rate on both loans effectively declined, due to drops in discount and origination points, which can fluctuate greatly from week to week. The rate on 30-year loans included an average 0.96 points paid, down from 1.34 points the week before, while average points on 15-year loans fell to 0.87, down from 1.45 points the previous week.

All averages are based on 80-percent loan-to-value mortgages. The survey covers 50 percent of all residential mortgage applications submitted in the United States each week.

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