By Mike Colpitts
Growing doubts about the U.S. economy and weakness in the job sector slowed mortgage application activity last week, despite a drop in key mortgage rates being offered by lenders, according to the Mortgage Bankers Association.
The market composite index, a combination of both refinances and home purchase applications dropped 3.8%. But the number of applications for home purchases rose as home buyers jumped on board to take advantage of all-time record low mortgage rates.
However, refinances fell 5.6% on a seasonally adjusted basis from the prior week, while purchases rose 2.7%. The slight upturn in applications for home loan purchases brought younger consumers back to the housing market to obtain financing.
The share of fixed rate loan borrowers remains the strongest segment of the marketplace, with 58.8% of those obtaining refinances receiving 30-year fixed rates, according to the bankers’ survey which accounts for about 75% of all U.S. home loan applications.
Another 23.1% selected 15-year fixed mortgages, with only 5.2% choosing adjustable loans. Fixed rates are the most popular as a result of low interest rates. The 30-year conventional mortgage obtained by borrowers at closing averaged 4.04% for the week, a single basis point drop from the prior week.
However, the average mortgage rate on a 30-year fixed rate loan backed by the Federal Housing Administration declined to 3.81% from 3.83% for borrowers, the lowest the FHA rate has been in the history of the survey.
The average mortgage rate on a fully executed 15-year home loan declined to 3.32%, a single basis point lower from the prior week to reach the lowest it has been in the bankers recorded history of the survey. The contract rate on the adjustable rate 5/1 year home loan also fell to 2.81% from 2.83%, the lowest since the beginning of March.