WASHINGTON (12/27/13)--A measure of mortgage application volume fell by 6.3% for the week ending Dec. 20, according to the Mortgage Bankers Association..
The drop, which was announced Tuesday, was caused by decreases in both components of the MBA market composite index. The refinance index fell by 7.7%%, and the seasonally adjusted purchase index fell by 3.5%. The latter is 11% lower on a year-over-year basis.
Interest rates were also up during a week that saw the Federal Reserve decide to cut back its $85 billion monthly quantitative easing program by $10 billion. The average contract rate on a 30-year fixed-rate mortgage was up two basis points (bp), rising for the seventh consecutive week to 4.64%. The five-year adjustable-rate mortgage was up by 6 basis points to 3.26%--60 bp higher on an annual basis.
Refinance applications dropped to 65% of total mortgage market activity, down from 66% the previous week. A four-week moving average of refinance activity has fallen by 22.7% over the past month and 66.3% over the past year.
Adjustable-rate mortgage share of market activity rose to 8.3%--its highest proportion since July 2008.
MBA Vice President of Research and Economics Mike Fratantoni noted that the government purchase application volume is also down by about a quarter on a year-over-year basis, with the drop likely caused by an increase in Federal Housing Administration mortgage insurance premiums.
Moody's analysts said that an increase in mortgage rates is expected to continue, with the Fed scaling back its asset-purchase program, and that stronger job growth and rising incomes will be needed to spark housing demand (Economy.com Dec. 24).
The MBA survey covers three-quarters of retail residential mortgage applications in the U.S. and has been conducted since 1990.