Mortgage Applications, Rates Both Decline

By:: Peter King | September 22, 2010

Mortgage application activity has fallen for the third consecutive week, despite declining interest rates that are at or near record lows.

Total applications declined a seasonally adjusted 1.4 percent last week, according to the Mortgage Bankers Association’s Market Composite Index, a measure of market volume. Refinance applications, which make up the bulk of new mortgages, declined for the third consecutive week, by 0.9 percent, while applications for mortgages to purchase homes dropped by 3.3 percent.

Overall, applications have dropped an average of 2.3 percent a week over the past four weeks, largely driven by an average 3.0 percent decline in refinance applications during that time. Give that interest rates have remained at or near historic lows, it suggests that the market for homeowners in a position to refinance is largely tapped out, or that many simply do not believe they would qualify for a refinance.

Purchase applications are up an average of 1.0 percent a week over the past month, reflecting continued weak demand in the housing market.

The average interest rate on 0-year fixed-rate mortgages fell to 4.44 percent from 4.47 percent the week before, with average fees and discounts falling to 0.81 points from 1.08 points. The average rate on 15-year fixed-rate loans fell to 3.88 percent from 3.96 percent, matching the all-time record low in the MBA survey set the week of Aug. 27. Average fees and discounts fell to 0.86 points from 1.03 points.

Figures are based on 80 percent loan-to-value mortgages. The MBA survey covers 50 percent of U.S. mortgage applications submitted during the week ending Friday, Sept. 17.

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