WASHINGTON – Mortgage applications nationwide fell last week to their lowest level in a month as the rate on adjustable-rate mortgages soared, the Mortgage Bankers Association said in a report today.
The group’s Market Composite Index – a measure of mortgage loan application volume – for the week ended Aug. 24 was 615.2 points after seasonal adjustment, declining 4.0 percent from the week before.
The MBA’s index of refinancing applications declined 4.2 percent last week to 1,729.6 points, and the purchase index fell 4.0 percent to 424.0 points, boosting the refinance share to 40.4 percent of total mortgage application activity, up from 39.9 percent the week before.
The leap in ARM rates – to 6.51 percent on a one-year adjustable loan, from 5.84 percent the previous week – was the biggest since the trade group began keeping records in 1996, the MBA said.
In another first, the average rate on 30-year fixed loans last week was lower than the rate on one-year ARMs; the 30-year rate dipped to 6.41 percent, from 6.49 percent the week before.
Analysts credited bank efforts to steer buyers toward safer loans as defaults on subprime mortgages continue to climb, according to Bloomberg News. The effort appeared to be working; the ARM share of total mortgage applications fell to 15.0 percent last week from 18.6 percent of all applications the week before.
“If rates go up and credit gets tighter, that is going to lead to a drop in demand on top of what we have already seen,” said Abiel Reinhart, an economist at JPMorgan Chase & Co. in New York. “That is going to have an adverse impact” through early next year.
More than 100 mortgage lenders have shut down or sought buyers this year, as investors have fled the sector, Bloomberg News noted.
The Mortgage Bankers Association, based in Washington, D.C., 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.
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