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Mortgage Round-Up: Rates Slip Near 2016 Lows, Applications Drop

home-in-your-handsRates fell a bit lower this week, but buyers did not hurry to take out a mortgage loan. On top of that, mortgage credit has tightened this month, which could be the reason that buyers were unable to purchase a home.

Freddie Mac's Primary Mortgage Market Survey showed that average fixed mortgage rates crept closer to 2016 lows after the Fed stood still on raising rates last week and other negative economic data.

According to Freddie Mac, the 30-year fixed-rate mortgage (FRM) averaged 3.61 percent for the week ending May 5, 2016, with an average 0.6 point. Last week, the 30-year FRM averaged 3.66 percent, and a year ago it averaged 3.80 percent.

The 15-year FRM also fell this week from 2.89 percent last week to an average of 2.86 percent this week. The 15-year FRM is down from last week when it averaged 2.89 percent and down from the year-ago average of 3.02 percent.

PMMS Graph

Even with rates remaining at historical lows, mortgage applications did not move much this week.

The Mortgage Bankers Association (MBA) reported that home applications decreased 3.4 percent for the week ending April 29, 2016 compared to the previous week. On an unadjusted basis, the Index fell 3 percent compared with the previous week.

The MBA reported that the Refinance Index declined 6 percent from the previous week. Meanwhile, the seasonally adjusted Purchase Index decreased 0.1 percent, and the unadjusted Purchase Index increased 1 percent compared with the previous week and was 13 percent higher than the same week one year ago.

The refinance share of mortgage activity decreased to 52.9 percent of total applications from 54.4 percent the previous week, the MBA said. The adjustable-rate mortgage share of activity increased to 5.3 percent of total applications. The FHA share of total applications increased to 13.5 percent from 12.3 percent the week prior. On the other hand, the VA share of total applications decreased to 11.5 percent from 12.2 percent the week prior and the USDA share of total applications decreased to 0.7 percent from 0.8 percent the week prior.

One possible reason for the slowing of mortgage applications is the tightening of credit in April. The MBA's Mortgage Credit Availability Index (MCAI) that mortgage credit availability fell 0.89 percent to 122.4 in April.

The MBA noted that a decline in the MCAI indicates that lending standards are tightening, while an increase means that credit is loosening. The index was benchmarked to 100 in March 2012.

Of the four component indices that the MBA reviewed, the Jumbo MCAI saw the greatest tightening (down 1.4 percent) over the month while the Conforming MCAI saw the most loosening (up 0.1 percent). The Conventional MCAI decreased 1.0 percent, while the Government MCAI decreased 0.7 percent over the month.

"Mortgage credit became less available in April as a result of two opposing trends, resulting in a net decrease to the index," said Lynn Fisher, MBA's VP of Research and Economics. "Investors continued to roll out Fannie Mae and Freddie Mac's low down payment loan programs, which had a loosening effect on credit availability. However, this was more than offset by tightening among high balance and jumbo loan programs."

Total Mortgage Credit Availability Index August 2015

About Author: Xhevrije West

Xhevrije West is a talented writer and editor based in Dallas, Texas. She has worked for a number of publications including The Syracuse New Times, Dallas Flow Magazine, and Bellwethr Magazine. She completed her Bachelors at Alcorn State University and went on to complete her Masters at Syracuse University.
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