The seasonally adjusted application volume index fell by 12.9% from the previous week spurred by refinance applications falling to their lowest number in the past 12 months, according to new figures released by the Mortgage Bankers Association.
Refinance applications fell by 15.3%, while the seasonally adjusted purchase application index dropped 8.7% to its lowest level since October last year. The data was not adjusted for Martin Luther King Day.
Scott Buchta, an analyst with Braver Stern, said the King Day holiday not being taken into account in the calculations was most likely the reason for the decline in both purchase and refinance applications.
This is because rates have remained relatively unchanged for the past four weeks. Thus, "we would estimate that both purchase and refinancing applications would have been flat to up slightly on an adjusted basis continuing their recent trends," he said.
Given the current rate environment, Buchta expects to see purchase applications to continue to rise slightly. However he predicts refinancings to "remain at depressed levels unless mortgage rates drop 50 basis points or more.
"Regardless of the accuracy of this week's numbers, we think that the downward trend in refinancing applications reflects a mortgage market where credit remains extremely tight and non-economic factors play a significant role in determining a borrower’s ability to refinance."
The market share of refi applications was 70.3%, down from 73.0% one week prior. MBA tracks activity through its proprietary application index.
The average contract interest rate for 30-year fixed-rate mortgages increased from 4.77% to 4.8%, with points decreasing to 1.19 from 1.20 (including the origination fee) for 80% loan-to-value ratio loans.
The average contract interest rate for the 15-year FRM decreased from 4.16% to 4.12%. Points increased to 1.26 from 0.90.
