Demand for home loans fell last week despite a dip in mortgage rates, with applications for U.S. home mortgages declining 4.1 percent in the week ended December 30.
Purchase loan requests declined 9.6 percent last week while refinancing requests fell 2.5 percent, the Mortgage Bankers Association showed on Wednesday.
Meanwhile, the average 30-year conforming mortgage fell to 4.07 percent, a low for the year and well below 4.82 percent at the end of 2010.
Though an index of mortgage applications rose 60 percent in 2011 as homeowners took advantage of near-record-low borrowing rates to refinance their homes, demand for home loans among buyers declined last year as economic uncertainty, particularly worries about unemployment, kept many potential buyers from taking such a risk.
The MBA does not foresee any quick rebound in the mortgage market, as guarantee fees for loans purchased by the government-sponsored enterprises and mortgage insurance premiums for Federal Housing Administration loans will eventually increase as part of legislation to extend the payroll tax cut for employees.
But Bob Moulton, president of American Mortgage Group in Manhasset, New York, says the company’s pipeline of loan requests is off to a better start in 2012 than it was a year ago as more homeowners seek refinancing. However, Moulton adds that caution prevails with a big overhang of unsold homes and the presidential election looming.
“It’s going to be another couple of years until these short sales and foreclosures are flushed out of the system, so you might see a little weakness in prices this year,” Moulton said. “We’re feeling a little better about 2012 than 2011, but you’re always waiting for the next shoe to drop.”
Refinancing applications represented roughly 82 percent of all mortgage activity last week. Total mortgage demand climbed 0.3 percent in the previous week, which ended December 23, with refinancing demand rising 0.5 percent to offset a 0.1 percent decline in purchase applications, according to the MBA survey, which covers over 75 percent of U.S. retail residential mortgage applications.
To contact the reporter on this story: Emily Knapp at firstname.lastname@example.org
To contact the editor responsible for this story: Damien Hoffman at email@example.com