Mortgage demand drops to 27-year low as interest rates pull back

Posted 28 days ago

From WWW.CNBC.COM

After rising sharply for several weeks, mortgage interest rates pulled back slightly last week, but not enough to revive mortgage demand.

Total mortgage application volume fell 2.9% last week, compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 7.21% from 7.31%, with points falling to 0.69 from 0.73 (including the origination fee) for loans with a 20% down payment.

"Mortgage applications declined to the lowest level since December 1996, despite a drop in mortgage rates," said Joel Kan, an MBA economist. "Rates remained more than a full percentage point higher than a year ago, despite mixed data on the health of the economy and signs of a cooling job market."

Applications to refinance a home loan — which are most sensitive to weekly interest rate changes — fell 5%, compared with the previous week, and were 30% lower than the same week one year ago. The vast majority of borrowers today have loans with rates below 4%. Even with high rates of home equity, borrowers are more likely to take out a second loan to pull cash out, rather than lose their low rate through a cash-out refinance.... (Read more)