Record low interest rates are not bringing borrowers to the table as the level of loan applications decreased 4.3% on a seasonally adjusted basis for the week ended Sept. 30 according to the Mortgage Bankers Association.
The Refinance index fell by 5.2% from the previous week, while the seasonally adjusted Purchase Index fell by 0.8%. On an unadjusted basis, the Purchase Index is 12.1% lower than the same week in 2010.
Potential borrowers are "seemingly unimpressed by the lowest (by any measure) mortgage rates since the 1940s," said Mike Fratantoni, MBA's vice president of research and economics.
One small positive is that purchase borrowers are using government lending programs at a much higher level than in the boom days. Fratantoni pointed out the share of government loan applications for purchases was 41.6% last week. This is down from a peak of 50.4% in April 2010, but well above the pre-2009 average of 23.6%.
He also pointed out that applications for 15-year fixed rate refis made up 27% of the market last week. The market share of refi applications fell marginally to 79.1% from 79.7% one week prior. MBA tracks activity through its proprietary application index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.18% from 4.24%, with points increasing to 0.44 from 0.36 (including the origination fee) for 80% loan-to-value ratio loans. For 30-year FRMs with jumbo loan balances, the average contract rate decreased to 4.49% from 4.53%, with points increasing to 0.41 from 0.39.
The average contract interest rate for 30-year Federal Housing Administration-insured loans decreased one basis point to 4.05%, while the average contract interest rate for 15-year FRMs increased to 3.49% from 3.46%.
