Mortgage Loan Applications Again On the Decline

U.S. home mortgage applications fell for a second straight week, reflecting a drop in demand for home purchases and refinancing even as interest rates fell.

The Mortgage Bankers Association said its index of mortgage applications, which includes both home purchase loan and mortgage refinancing activity, fell 4.0 percent in the week ending August 24.

Applications, however, are 10.5 percent above their year-ago level.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, were 6.41 percent, down 0.08 percent from the week before. The home loan rates are above year-ago levels at 6.39 percent.

The four-week moving average of mortgage loan applications, which smooths out the more volatile weekly figures, was up 0.3 percent.

A sharp rise in defaults in the bad credit home loan sector, which caters to the borrowers with poor credit, has caused lenders to tighten requirements for all buyers, making it more difficult for those with weaker credit (or even average credit) to qualify for a home loan.

The MBA’s seasonally adjusted purchase index fell 4.0 percent. The index is up more than 12 percent from this time a year ago, however.

The group’s seasonally adjusted index of mortgage refinancing applications fell 4.2 percent, similarly, but is up 7.5 percent from a year ago.

The mortgage refinance share of applications increased to 40.4 percent from 39.9 percent the previous week.

Fixed 15-year mortgage rates averaged 6.10 percent, down from 6.20 percent. Rates on one-year ARMs increased to 6.51 percent from 5.84 percent.

The ARM share of overall home mortgage activity decreased to 15.0 percent, down from 18.6 percent the previous week.

Most housing market indexes, in general, are volatile, but the data paints a poor picture and suggest a delayed recovery for the hard-hit sector.

The MBA survey covers about 50 percent of retail residential home mortgage loans. Respondents include mortgage banks, commercial banks and thrifts.

SOURCE: Reuters