Mortgage Applications Drop as Refinancing Hits Slump

Consumer demand for home loans fell last week for the first time in a month, as low interest rates failed to entice borrowers to refinance their mortgages, according to data released by the ""Mortgage Bankers Association"":http://www.mortgagebankers.org (MBA) Wednesday.

[IMAGE]

The industry trade group's ""weekly study"":http://www.mortgagebankers.org/NewsandMedia/PressCenter/71721.htm showed that overall mortgage application volume â€" including loans for refinancing and new purchases â€" declined 10.9 percent for the week ending January 22, 2010, on a seasonally adjusted basis.

[COLUMN_BREAK]

MBA's refinance index plummeted 15.1 percent from the previous week, with the refinance share of mortgage activity decreasing to 67.6 percent of total applications, compared to 71.7 percent the week before. Requests for new purchases dropped also, though not as steeply, down 3.3 percent from one week earlier.

""Refinance activity fell substantially last week,"" said Michael Fratantoni, MBA's VP of research and economics. ""Although rates remain low, there appears to be a smaller pool of borrowers who are willing and able to refinance at today's rates.""

Based on MBA's analysis, mortgage interest rates ticked up slightly last week, although long-term rates still sit at historically low levels.

The average contract interest rate for 30-year fixed-rate mortgages increased to 5.02 percent from 5.00 percent, MBA reported.

Rates for 15-year fixed-rate mortgages averaged 4.34 percent, up from 4.33 percent the week before.