Mortgage application volume declines again, but purchase activity up

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Mortgage applications decreased sharply from one week earlier as key interest rates stayed above 5%, although purchase volume grew from a year ago, the Mortgage Bankers Association reported.

The MBA's Weekly Mortgage Applications Survey for the week ending Oct. 12 found that activity fell by 7.1% from the previous week. This week's results did not include adjustment for the Columbus Day holiday.

"Mortgage applications were likely impacted by both the Columbus Day holiday and the increase in rates, as we saw declines in both purchase and refinance activity. However, it's important to note that purchase activity remained 2.5% higher than a year ago, which is in line with our forecast for gradual gains in purchase activity this year," Joel Kan, the MBA's associate vice president of industry surveys and forecasts, said in a press release.

"Treasury rates increased over the week, mainly as communication from Federal Reserve officials pointed to a continued path of rate hikes, based on the strength of the economy and hot job market."

Refinance application volume fell by 9% and the share of decreased to 38.1% of total applications from 39% the previous week.

The seasonally adjusted purchase index decreased 6% from one week earlier, while the unadjusted purchase index decreased 6% compared with the previous week but was 2% higher than the same week one year ago.

Adjustable-rate loan activity decreased to 7.1% from 7.3% of total applications, while the share of Federal Housing Administration-guaranteed loans decreased to 10.4% from 10.5% the week prior.

The share of applications for Veterans Affairs-guaranteed loans increased to 10.4% from 10% and the U.S. Department of Agriculture/Rural Development share remained unchanged at 0.8% from the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) increased to its highest level since February 2011, 5.1%, from 5.05%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $453,100), the average contract rate decreased 1 basis point to 4.98%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to its highest level since April 2011, 4.99%, from 4.98%. For 15-year fixed-rate mortgages the average increased to its highest level since February 2011, 4.5%, from 4.44%.

The average contract interest rate for 5/1 ARMs increased to its highest level since the series began in 2011, 4.34%, from 4.29%.