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Mortgage application volume decreases yet again

According to the MBA, mortgage application volume continues to fall as mortgage interest rates slide upward. This forward-looking indicator is monitored for its implications on housing sales in the coming months.

mortgage application volume

mortgage application volume

Mortgage application volume declines

According to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 5, 2013, mortgage application volume fell 4.0 percent from the week prior, including an adjustment for the Independence Day holiday. As the mortgage interest rates rise, the mortgage application volume is decreasing, and if less people apply for loans, less people contract on a home, so this early economic indicator is one we watch carefully not only as an indicator of sentiment, but to gauge future home sales.

The MBA reports that the overall index fell 4.0 percent on an adjusted basis from the previous week, and dropped 23 percent on an unadjusted basis, with the holiday being the primary driver followed by rising mortgage rates. The Refinance Index fell 4.0 percent for the week, while the seasonally adjusted Purchase Index fell 3.0 percent, and while a dip is bad news, the Purchase Index is still 5.0 percent higher than the same week in 2012, proving the very slow but steady drumbeat of a housing recovery.

After the refinance share of mortgage activity hovered around 80 percent for most of 2012, this year has seen that number slide, now resting at 64 percent of total applications.

Average contract interest rates

According to the MBA, the average contract interest rates are increasing and even hitting milestones:

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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 4.68 percent, the highest rate since July 2011, from 4.58 percent, with points increasing to 0.46 from 0.43 (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 4.86 percent, the highest rate since July 2011, from 4.68 percent, with points decreasing to 0.37 from 0.38 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
  • The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 4.37 percent, the highest rate since September 2011, from 4.27 percent, with points decreasing to 0.39 from 0.44 (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 3.76 percent, the highest rate since July 2011, from 3.64 percent, with points decreasing to 0.41 from 0.44 (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 3.40 percent, the highest rate since May 2011, from 3.33 percent, with points increasing to 0.54 from 0.31 (including the origination fee) for 80 percent LTV loans. The effective rate increased 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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