Mortgage applications headed downward again last week, reaching levels not seen since 2002 as refinance volume continues to shrink and purchase applications remain at historically low levels. The Mortgage Bankers Association said Wednesday morning that its weekly survey of applications found a 1.5 percent decrease in its composite application index, to 419.3 for the week ended Aug. 15. That total was off 34.2 percent compared to year-ago application volume. The MBA application index is calibrated to March 16, 1990; a reading of 419.3 means that application activity was roughly 4.2 times greater than when the index was first established. Application volume is now off 61 percent from its 2008 peak, recorded in February. The drop in the MBA index roughly corresponded to results in a separate application index, the MAX series published by Mortgage Maxx LLC and often used by Wall Street prepayment researchers as a forward demand indicator; the MAX index fell 3.3 percent to a reading of 117.3 for the week ended Aug. 15, while a subindex tracking application activity in California fell 4.3 percent. “With two more weeks left until the unofficial end of summer and mortgage rates threatening six-year highs, little on the horizon suggests any reversal of the current seasonal trend through the end of 2008,” said Mortgage Maxx publisher Paul Descloux. Refinancing activity led the downward charge last week, according to MBA data, dropping 3.7 percent; purchase applications fell 0.4 percent, despite mortgage rates that appear to have eased somewhat during the week. The MBA’s preliminary rate survey found that the average contract interest rate for 30-year fixed-rate mortgages decreased to 6.47 percent from 6.57 percent; formal rate surveys are due out Thursday. Not surprisingly, the refinance share of mortgage activity decreased to 34.8 percent of total applications from 35.2 percent the previous week; ARM share, somewhat surprisingly, increased to 8.0 percent of all applications, the MBA said. For more information, visit http://www.mortgagebankers.org.

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