Applications for mortgages stumbled to their lowest level in six years last week as rates on fixed-rate mortgages surged, according to data released Wednesday morning
by the Mortgage Bankers Association
. The association's composite index, which covers purchase and refinancing activity, fell 15.3 percent on a seasonally-adjusted basis to 502.3 for the week ended May 30, from a reading of 593.3 one week earlier. Applications were off 20.3 percent compared to the same week one year earlier.
The MBA application index is calibrated to March 16, 1990; a reading of 502.3 means that application activity was roughly five times greater than when the index was first established. This week's data was adjusted for the Memorial Day holiday, the MBA said.
The alarming drop in the MBA index matches a similar dramatic drop
in a separate application index published by the Mortgage Maxx Advance Factor Service
on Monday, which found a 7.8 percent drop in applications. While both indexes are similar, and often report directionally consistent results, the Max index corrects for repeated application activity.
Refinance activity fell sharply, the MBA reported: an index of refinancing activity fell 25.7 percent, while purchase application activity decreased 5.4 percent on a weekly comparison basis. Even a measure of FHA application activity dropped, falling 3.3 percent.
In addition to significantly tightened lending standards, an apparent jump in mortgage rates appeared to have driven refinance activity off of a cliff -- refi activity tends to drive the overall MBA application index.
The MBA reported that average rates on a 30-year fixed-rate mortgage soared this past week, jumping a whopping 21 basis points in one week to 6.17 percent. Formal rate surveys from both Freddie Mac (FRE)
and Bankrate.com are due to be released Thursday.
Disclosure: The author held no positions in FRE when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.