MBA: Despite Dip In Interest Rates, Mortgage Application Volume Falls

Although the average interest rate for 30-year fixed-rate mortgages decreased to 4.58% for the week ending July 19, mortgage application volume also decreased about 1.2% from the week prior, according to the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey.

The drop in interest rates follows comments from Federal Reserve Chairman Ben Bernanke last week that the Fed's timeline for winding down the central bank's bond-buying program was not set in stone. Bernanke's comments helped soothe a market that became rattled after he announced on June 19 that the Fed was planning to start curtailing its bond-buying program starting in the fourth quarter. That statement, in turn, caused turmoil in the markets and a steady increase in interest rates that lasted about four weeks.

In testimony last week, however, Bernanke said the Fed would not start scaling back its bond purchases in the fourth quarter unless certain economic criteria, including unemployment, had improved.

According to the MBA's report, the average interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.58% from 4.68% the previous week.

But that was not enough to get potential buyers off the fence: On an unadjusted basis, loan volume decreased 1% compared with the previous week.

The volume of refinancings also continued to drop. The MBA's Refinance Index decreased 1% from the previous week to reach its lowest level since July 2011, driven mainly by a 12% drop in the Government Refinance index. Meanwhile, the Conventional Refinance index rose by about 2%, according to the report.

Still, the refinance share of total mortgage activity was unchanged at 63% of applications.


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