Mortgage applications fell for the third consecutive week, but loans for home purchases increased, indicating pent up demand is starting to show as borrowers sign-up for record low mortgage rates in the midst of the busy summer home buying season. Mortgages for home purchases rose 3%, according to the Mortgage Bankers Association survey.
Refinances, however, which make up more than three-quarters of mortgage activity, declined another 3%, despite record low mortgage rates being locked-in by borrowers. The average contract rate on a 30-year fixed mortgage being finalized by borrowers was 3.79%, the lowest in the history of the survey.
Mortgage rates on government backed FHA loans were even lower, declining to 3.63% on the average 30-year fixed rate loan, a drop from 3.69% the prior week. The rate was also the lowest in the history of the bankers’ survey.
The 15-year fixed rate shorter term fixed loan fell to 3.15% from 3.20% a week earlier on 80% loan-to-value mortgages. The rate was also the lowest being signed up for by borrowers since rates have been tracked by bankers.
A drop in yields paid to investors on U.S. Treasuries triggered the drop in rates. The decline comes as a result of economic uneasiness over the U.S. economy and world economic troubles coupled with a series of negative reports about the nation’s economy.
The average rate on an adjustable 5/1 loan also fell to an average of 2.71%, also the lowest in the history of the survey. The four basis point reduction was typical of rates being locked-in by borrowers seeking the lowest rates possible.
The 30-year fixed rate mortgage, the benchmark for all home lending activity, has remained under 4.00% since the beginning of the year. Economic weakness across the world is likely to drive rates lower in coming weeks.