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Mortgage Application Volume Plummets 11%

A decline in refinance activity due to a spike in interest rates caused overall mortgage loan application volume to plummet 11 percent for the week ending April 2, 2010, the ""Mortgage Bankers Association"":http://www.mortgagebankers.org/default.htm (MBA) reported Wednesday.

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According to MBA's Weekly Mortgage Applications Survey, the Refinance Index tumbled 16.9 percent from the previous week, and the refinance share of mortgage activity decreased to 58.7 percent of total applications from 63.2 percent the week prior. However, the Purchase Index increased 0.2 percent on a week-to-week basis.

""Refinance application volume dropped as mortgage rates reached their highest level since August 2009,"" said Michael Fratantoni, MBA's VP of research and economics. ""Purchase volume was essentially unchanged relative to the prior week going into the Easter weekend.""

The government purchase index increased significantly for the third straight week. As a result, the government share of purchase applications surged to 49.9 percent, its highest level since February 1990 and the third highest level in the history of the data.

A spike in interest rates was the culprit of the week-to-week decline in mortgage application volume. ""Mortgage rates jumped last week as the ""Federal Reserve completed their purchases of mortgage-backed securities"":http://dsnews.comarticles/feds-mortgage-purchase-program-sunsets-2010-03-31,"" Fratantoni said.

MBA said the average contract interest rate for 30-year fixed-rate mortgages soared to 5.31 percent from 5.04 percent, with points decreasing to 0.64 from 1.07 for 80 percent loan-to-value (LTV) ratio loans. This is the highest 30-year rate recorded in the survey since the first week of August 2009.

In addition, the average contract interest rate for 15-year fixed-rate mortgages increased to 4.54 percent from 4.34 percent, with points falling to 0.92 from 0.98 for 80 percent LTV loans.

About Author: Brittany Dunn

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