U.S. home-loan applications plunge

WASHINGTON – U.S. mortgage applications last week fell 24.5 percent compared with the week ended Jan. 31 and 23.5 percent compared with a year ago, even as contract interest rates on 15- and 30-year loans continued to decline, the Mortgage Bankers Association reported today.
In the week ended Feb. 6, the trade group’s seasonally adjusted Market Composite Index – a measure of overall mortgage loan-application volume – fell to 600.6 points (March 16, 1990 = 100 points) from 795.4 points the week before. But it remained more than 50 percent above the eight-year low of the week ended Nov. 15, when the index fell to 398.6 points. (READ MORE)
The MBA survey, conducted weekly since 1990, covers about half of all U.S. retail home mortgage applications.
Its seasonally adjusted Purchase Index fell 9.8 percent week over week to 234.9 points – the measure’s lowest level since December 2000, and 55.62 percent below its June 2005 peak of 529.3 – after falling 11.2 percent to 261.4 points in the week ended Jan. 31. Applications to purchase a home using Federal Housing Authority (FHA) and other government-backed loans fell 7 percent last week, while applications for non-government-backed loans fell 11.1 percent, the MBA added.
The Refinance Index fell 30.3 percent last week to 2,722.7 – or 59.71 percent below the five-year high of 6,758.6 recorded in the week ended Dec. 19 (READ MORE) – after rising 15.8 percent in the final week of January. Refinancing was the goal of 66.7percent of loan applications last week, down from 73.2 percent the week before.
The share of mortgage applicants who were seeking adjustable-rate mortgages (ARMs) – rather than conventional fixed-rate loans – edged up to 2.5 percent last week from 2.1 percent the week before, despite ARM rates that were higher than those on conventional loans.
The average contract interest rate for a 30-year, fixed-rate mortgage decreased to 5.19 percent last week from the preceding week’s 5.28 percent and the average rate on a 15-year, fixed-rate loan dipped to 5 percent from the previous 5.15 percent. But the contract rate on a one-year ARM edged up to 6.22 percent from the preceding week’s 6.09 percent average.
“Lenders are reluctant to underwrite mortgages to any potential homeowner without pristine credit,” Ryan Sweet, an economist at Moody’s Economy.com in West Chester, Pa., told Bloomberg News. Moreover, he said, “new homebuyers are still few and far between, because of the measurable deterioration in the labor market and reduced access to credit.”
Some potential buyers also might be awaiting the fate of the first-time-buyer tax credit included in the Senate version of the economic stimulus bill now being weighed by Congress.
The Mortgage Bankers Association is a trade group representing the real estate finance industry. Its 3,000 member companies include mortgage firms, commercial banks, thrifts, life insurance companies and others. Additional information, including the MBA’s Weekly Application Survey, is available at www.MortgageBankers.org.