Mortgage apps drop again despite declining interest rates

Mortgage application activity fell for the seventh time in eight weeks, undeterred by three straight weeks of declining interest rates since most borrowers likely already refinanced, the Mortgage Bankers Association said.

The MBA's Market Composite Index dropped 2.5% from the week prior on a seasonally adjusted basis and 2% on an unadjusted basis for the week ended April 23. Compared with the same week last year, application volume is down by 4.9%.

“The purchase market’s recent slide comes despite a strengthening economy and labor market,” Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. “Activity is still above year-ago levels, but accelerating home-price growth and low inventory has led to a decline in purchase applications in four of the last five weeks.”

The Refinance Index decreased 1% on an unadjusted basis from the previous week and dropped 18% from the year-ago level. Conventional refis dipped 1.7% week-over-week while government mortgage refi volume rose 0.8%.

The refinance share of application volume grew again, going to 60.6% from 60% last week.

Meanwhile purchase applications fell 5% on a seasonally adjusted basis and 4% unadjusted compared with the previous week. However, unadjusted purchase application volume spiked 34.1% compared with a year ago.

The average size for all loan types this week crept down to $330,000 from $330,200 one week earlier. Purchase mortgages also fell to an average price of $400,100 from $406,100 while refinancings jumped to $284,300 from $279,500.

The share of adjustable-rate mortgage applications edged down to 3.5% from 3.6%.

The share of Federal Housing Administration-insured mortgage applications dropped to 10.7% of the total from 11.3% week-over-week. The Veterans Affairs-guaranteed share grew to 12.2% from 11.5% while the U.S. Department of Agriculture/Rural Housing Service remained static at 0.4%.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) decreased to 3.17% from 3.20% a week ago, while the rate for jumbo loans also decreased to 3.28% from 3.34%.

The average contract rate for FHA loans fell again to 3.12% from 3.15%, and the 15-year FRM dropped 10 basis points to 2.55%. Rates on the 5/1 ARM decreased to 2.59% from 2.67% last week.