Mortgage applications continue to slide, sales will follow

Mortgage application volume drops again

As a gauge of home buyer interest, we look to mortgage application volume to measure what the future holds for closed contracts, and when the volume falls week after week, it is a sign that sales may have hiccups in coming months as well.

According to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 26, 2013, mortgage applications fell 3.7 percent from the previous week, marking the seventh consecutive week of declining application levels.

The Refinance Index decreased 4.0 percent from the previous week and the Purchase Index fell 3.0 percent. The silver lining is that application volume is sliding, but the Purchase Index is actually 5.0 percent higher than the same week one year ago.

“Mortgage rates were little changed last week, but remain roughly one percentage point higher than they were three months ago,” said Mike Fratantoni, MBA’s Vice President of Research and Economics. “Refinance application volume continues to decline, with the refinance index now more than 55 percent lower than its recent peak, reaching the lowest level in over two years. Applications for home purchases dropped for the fourth time in five weeks, but purchase volume is running about 5 percent higher than last year at this time.”

After hovering around 80 percent for most of last year, the refinance share of mortgage activity was at 63 percent of total applications, unchanged from the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.0 percent of total applications. The HARP share of refinance applications increased to 37 percent from 34 percent the week prior.

Average contract interest rates

• The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) was unchanged at 4.58 percent, with points decreasing to 0.38 from 0.40 (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) decreased to 4.64 percent from 4.66 percent, with points decreasing to 0.39 from 0.41 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
• The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 4.30 percent from 4.28 percent, with points decreasing to 0.31 from 0.33 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
• The average contract interest rate for 15-year fixed-rate mortgages increased to 3.67 percent from 3.63 percent, with points increasing to 0.40 from 0.35 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
• The average contract interest rate for 5/1 ARMs increased to 3.39 percent from 3.30 percent, with points increasing to 0.36 from 0.34 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.