Mortgage applications drop for second straight week as demand wanes

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Mortgage application volume was down for the second consecutive week, this time by 1.8%, as a new record low for rates was not enough to overcome diminished demand, according to the Mortgage Bankers Association.

The MBA's Weekly Mortgage Applications Survey for the week ending June 26 found that the refinance index decreased 2% from the previous week and was 74% higher than the same week one year ago. The refinance share of mortgage activity decreased to 61.2% of total applications from 61.3% the previous week.

"Mortgage applications fell last week despite mortgage rates hitting another record low in MBA's survey. Investors are contemplating the risks of the recent resurgence of COVID-19 cases to the labor market and economy, and Treasury rates and mortgage rates are moving lower as a result," Joel Kan, the MBA's associative vice president of economic and industry forecasting, said in a press release. "After two months of strong growth, purchase applications declined for the second week in a row. The weakening in activity is potentially a signal that pent-up demand is starting to wane and that low housing supply is limiting prospective buyers' options. The average purchase application loan size increased to a record high in our survey — more proof that tight inventory conditions are leading to faster price growth."

The seasonally adjusted purchase index decreased 1% from one week earlier, while the unadjusted purchase index decreased 2% compared with the previous week but was 15% higher than the same week one year ago.

"Refinance applications also decreased. The 30-year fixed rate has been below the 3.5% mark since late March. It is possible that many borrowers have already refinanced or are waiting for rates to go even lower," Kan said.

Adjustable-rate mortgage activity increased to 3.2% from 3.1% of total applications, while the share of Federal Housing Administration-insured loan applications increased to 11.7% from 11.4% the week prior.

The share of applications for Veterans Affairs-guaranteed loans decreased to 10.8% from 11% and the U.S. Department of Agriculture/Rural Development share decreased to 0.6% from 0.7% the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased 1 basis point to 3.29%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350), the average contract rate decreased 3 basis points to 3.59%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased 8 basis points to 3.43%. For 15-year fixed-rate mortgages, the average remained unchanged at 2.81%. The average contract interest rate for 5/1 ARMs decreased 5 basis points to 3.04%.

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