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Interest in mortgages fall despite falling interest rates

Seeing one of the more dramatic dips in mortgage application volume in recent weeks, the MBA reports that there is a silver lining hidden within in their recent data.

mortgage trends

Interest rates down, so is interest in mortgages?

According to data from the Weekly Mortgage Applications Survey conducted by the Mortgage Bankers Association’s (MBA) for the week ending Oct. 12, 2012, mortgage application volume fell 4.2 percent from the week prior, after most previous weeks in prior months saw declines as well, albeit not as large as last week which was adjusted to account for the Columbus Day holiday. On an unadjusted basis, the volume fell 14.0 percent compared to last week, despite historically low interest rates.

The volume of refinance applications fell 5.0 percent from the week prior, now accounting for 82.0 percent of total applications, down 1.0 percent from the previous week’s reading. The silver lining from the MBA comes in the form of an increased volume of purchase applications, which on an unadjusted basis rose 9.0 percent. The MBA did not report what the adjusted reading results were.

The adjustable-rate mortgage (ARM) share of activity remained constant at 4 percent of total applications. The HARP share of refinance applications increased to 22 percent from 18 percent the prior week.

Average contract interest rates

According to the MBA:

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  • The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.57 percent from 3.56 percent, with points increasing to 0.44 from 0.39 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.
  • The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) increased to 3.81 percent from 3.74 percent, with points increasing to 0.42 from 0.40 (including the origination fee) for 80 percent LTVs. The effective rate increased from last week.
  • The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA remained constant at 3.34 percent, with points increasing to 0.82 from 0.71 (including the origination fee) for 80 percent LTVs. The effective rate increased from last week.
  • The average contract interest rate for 15-year fixed-rate mortgages decreased to 2.87 percent from 2.88 percent, with points decreasing to 0.39 from 0.40 (including the origination fee) for 80 percent LTVs. The 15-year contract rate has decreased for eight consecutive weeks and is a new record low in the survey. The effective rate decreased from last week.
  • The average contract interest rate for 5/1 ARMs decreased to 2.59 percent from 2.60 percent, with points decreasing to 0.35 from 0.36 (including the origination fee) for 80 percent LTVs. The contract rate matched the lowest rate in the series. The effective rate decreased from last week.

Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

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