Applications for home mortgages dropped 6.5% for the week, despite a decline in mortgage interest rates, according to the Mortgage Bankers Association. The drop came as a result of fewer homeowners and potential new home buyers applied for mortgages as the U.S. economy deals with a series of challenges, including long term concerns over higher unemployment.
After rising at double-digit levels, refinances experienced a drop of 6.5% for the week, while applications for new home mortgages declined by 6.1% from a week earlier. However, the four week moving average for the combined index is down just 2.5%, indicating that only a minor slowdown has developed.
However, since the expiration of the federal tax credit for home buyers the index has shown a major drop, falling 19.6% for the same week a year ago when the tax credit was still in effect. Refinancing still composed the largest share of mortgage volume, controlling 64.9% of mortgage applications.
The average mortgage rate on a 30-year fixed rate loan closed by loan agents during the week dropped to 4.84% from 5% the previous week, according to the bankers’ association survey, which accounts for about half of all residential mortgages made in the U.S. on an 80% loan-to-value mortgage. It’s the third straight week that 30-year fixed rate mortgages have dropped in the survey.
The average contracted rate on a closed 15-year fixed rate mortgage declined to 4.17% from 4.28% with 1.07 points as lenders keep rates low in order to attract more qualified borrowers back to the market.