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Bottom falls out as mortgage applications plunge 9.2%

Steep drop reverses last week’s gains, revives downward momentum

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A week after unexpectedly jumping 10.3% last week, mortgage applications returned to their declining trend despite near year-low interest rates.

Applications dropped 9.2% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending June 13, 2014.  

The Market Composite Index, a measure of mortgage loan application volume, decreased 9.2% on a seasonally adjusted basis from one week earlier. 

The Refinance Index decreased 13% from the previous week.  The seasonally adjusted Purchase Index decreased 5% from one week earlier. 

“Interest rates increased relative to the previous week, as incoming economic data continues to suggest a pickup in the pace of growth,” said Mike Fratantoni, MBA’s Chief Economist.  “Although the average rate for the week was up only a few basis points, the increase was matched by a large drop in refinance volume, and purchase application volume also declined.  Some lenders continue to report that they have pre-approved borrowers who have been unable to find a property given the tight inventory in certain markets.”

The refinance share of mortgage activity decreased to 52% of total applications from 54% the previous week. The adjustable-rate mortgage share of activity remained unchanged at 8% of total applications.

“While the recent uptick in rates may have a little to do with a drop in mortgage application volume, purchase activity in many areas nationwide continues to suffer from a lack of inventory and confidence," Quicken Loans vice president Bill Banfield said. "Many consumers are very content with keeping their homes off the market, especially during the summer.”

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.36% from 4.34%, with points increasing to 0.24 from  0.16 (including the origination fee) for 80% loan-to-value ratio 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 $417,000) increased to 4.32% from 4.27%, with points decreasing to 0.09 from 0.12 (including the origination fee) for 80% 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 4.07% from 4.06%, with points decreasing to -0.39 from -0.03 (including the origination fee) for 80% LTV loans.  The effective rate decreased from last week. 

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.50% from 3.43%, with points decreasing to 0.16 from 0.22 (including the origination fee) for 80% LTV loans.  The effective rate increased from last week.

The average contract interest rate for 5/1 ARMs increased to 3.20% from 3.18%, with points decreasing to 0.27 from 0.35 (including the origination fee) for 80% LTV loans.  The effective rate remained unchanged from last week. 

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