Mortgage Applications Drop to Lowest Volume in 13 Years

The Mortgage Bankers Association reported this morning in its Weekly Mortgage Applications Survey that the volume of mortgage applications filed in the United States last week slipped 12.2 percent from the previous week. It was the fifth-straight week that applications fell, and was the lowest volume level since February 1997.

This week’s results include an adjustment to account for the Memorial Day holiday.  On an unadjusted basis, the Index decreased 21.1 percent compared with the previous week.

The decline of mortgage applications in the past month reinforces the notion that the first-time home buyer tax credit and repeat home buyer tax credit forced buyers to scramble before the April 30 expiration dates, subsequently depleting future sales as people rushed to take advantage of the rebates.

“Purchase applications are now 35 percent below their level of four weeks ago, as homebuyers have not yet returned to the market following the expiration of the homebuyer tax credit at the end of April,” Michael Fratantoni, MBA’s vice president of research and economics, said in a statement.

The seasonally-adjusted Purchase Index fell 5.7 percent last week and the Refinance Index fell off by 14.3 percent. The slowdown in refinance applications was the first time in a month that it went backwards, and Fratantoni suggest that the plunge implies many homeowners who qualify for refinancing have done so already.

“Although rates remained essentially flat, refinance applications dropped this past week for the first time in a month.  Despite the historically low rates, many homeowners have already refinanced recently, remain underwater on their mortgages, have uncertain job situations, or have damaged credit following this downturn, and therefore may not qualify to refinance,” said Fratantoni.

Of all the mortgage applications filed last week, 72.2 percent were for refinancing loans, down from 73.8 percent from the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.1 percent from 5.2 percent of total applications from the previous week, which is the third consecutive weekly decrease.

Also from the MBA weekly report:

The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.81 percent from 4.83 percent, with points decreasing to 1.02 from 1.05 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.  The effective rate also decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 4.26 percent from 4.24 percent, with points decreasing to 0.95 from 1.11 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for one-year ARMs decreased to 6.94 percent from 6.96 percent, with points increasing to 0.30 from 0.27 (including the origination fee) for 80 percent LTV loans.