Homeowners and shoppers feast again on tiny rate drops

A few extra basis points last week was all it took for buyers to fill out more home loan applications. 

Mortgage applications grew 5.4% in the week ending Dec. 6, marking a fifth consecutive stretch of growth, the Mortgage Bankers Association reported in its Weekly Mortgage Applications Survey. The trade group's Refinance Index also rose 27% from the prior week, and was up 42% year-over-year.

Home shoppers enjoyed the effective rate for most mortgage products dropping last week, with the average contract rate for 30-year fixed-rate mortgages falling two basis points to 6.67%. Buyers were less swayed as the Purchase Index dropped 4% from the prior period, but the MBA said activity was relatively strong. 

"Purchase activity continues to be supported by sustained housing demand and inventory that continues to grow gradually in many markets," said Joel Kan, the MBA's vice president and deputy chief economist, in a press release. 

Homeowners with government-backed loans were especially active, as Department of Veterans Affairs-backed refis were up 85% last week. The Government Refinance Index touted the highest weekly rise at 38.1%. 

The swing came as lenders' credit offerings have fallen in recent weeks in response to the overall sluggish market. Government-guaranteed mortgage offerings in November fell to a decade low, while the MBA's index for conventional loan credit availability also hit a 12-year low. 

An Optimal Blue report for the month also found cash-out refinances and rate-and-term refi locks down 20% and by half, respectively, from October. 

Refis to kick off December made up 46.8% of total applications, rising from just a third of the market last week. 

Tiny rate drops included a six basis point drop for jumbo loans, to 6.79%; and two basis points for Federal Housing Administration loans to 6.47%. Only the 15-year FRM rate was unchanged, at 6.12%.