Amid higher interest rates, applications for home loans continued their seemingly endless downtrend. According to the Mortgage Bankers Association’s latest report, for the week ended December 20, loan applications dropped 6.3 percent on a seasonally adjusted basis from one week earlier. It was the 24th decline in only 32 weeks.
The figure includes both refinancing and home purchase demand, and covers more than 75 percent of all domestic retail residential mortgage applications. The seasonally adjusted purchase index also fell 4 percent from the prior week, while the refinance index plunged 8 percent.
“Following the Federal Reserve’s taper announcement, mortgage application volume dropped again last week, with rates increasing and refinance application volume falling to its lowest level since November 2008,” said Mike Fratantoni, MBA’s Vice President of Research and Economics. “Purchase application volume was weak too, continuing to run more than ten percent below last year’s pace.”
Overall, the refinance share of mortgage activity accounted for 65 percent of total applications, compared to 66 percent from a week earlier. However, with interest rates on the rise, refinance activity is not expected to pick up significant momentum anytime soon.
With the Federal Reserve deciding to dialing down its bond-purchasing program by $10 billion per month, the average interest rate for a 30-year fixed-rate mortgage increased from 4.62 percent to 4.64 percent, the highest rate since September. The most recent average rate for a 15-year fixed-rate mortgage came in at 3.74 percent, up from 3.66 in the prior week. Looking ahead, Zillow expects mortgage rates to exceed 5 percent for the first time since early 2010 next year.
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