Falling Mortgage Rates Fail to Spur Borrower Interest; Applications Lowest Since End of 2001
Despite mortgage rates that it said fell nearly 20 basis points last week, the Mortgage Bankers Association said Wednesday morning that the number of borrowers applying for a new or refinanced mortgage last week fell to levels not seen since the end of 2001. The MBA's weekly composite index of loan application volume was just 461.3 for the week ended June 20, a decrease of 9.3 percent on a seasonally-adjusted basis from 508.4 one week earlier. Applications were off 25.3 percent from year-ago levels. The MBA application index is calibrated to March 16, 1990; a reading of 461.3 means that application activity was 4.6 times greater than when the index was first established. This week's index is at its lowest level since December 21, 2001 -- a sharp drop that likely underscores the clear end of whatever spring sales bounce was to be had this year, sources told HW. "It's looking like the spring sales bounce helped keep applications and sales in some areas at a flat-line level," said one source, a bank executive that commented on condition on anonymity. "Now that we're past that, we're back into a free fall, and I don't know that I see things getting dramatically better this year." Both purchase and refinance applications took a hit last week, the MBA said; its index of refinancing activity decreased 12.1 percent, while a seasonally-adjusted purchase index fell 7.4 percent. Even FHA application activity dropped 11.1 percent, as well. The MBA index numbers generally match those published Monday by Mortgage Maxx LLC, whose own application index dropped 4.2 percent, matching its lowest level this year. The Max application index has traditionally been used by Wall Street prepayment researchers, as it corrects for the effects of multiple applications. "New grant deeds do indeed show some temporary buoyancy courtesy of the now tapering spring selling season," said Paul Descloux at Mortgage Maxx, nodding towards the likely effect of the traditional selling season on application activity. "Of course, this year truly is different as foreclosure bargain hunters may be outpacing more traditional buyers." Somewhat amazingly, refinancing activity represented just 36.3 percent of overall application activity last week, according to the MBA; in recent months, refinancing has been nearly 50 percent of activity. Borrowers seeking an adjustable-rate mortgage fell to just 8.5 percent of all applications, the organization said. The drop in applications comes despite an apparent drop in interest rates -- a traditional driver of refinance activity. The MBA reported that the average rate on a fixed-rate 30-year mortgage fell to 6.39 percent from 6.57 percent one week earlier. For more information, visit http://www.mortgagebankers.org.