The number of mortgage applications filed this past week was little changed from the week before, according to the Mortgage Bankers Association, as a rise in refinance requests tempered a decline in home purchase applications.
The MBA’s measure of all mortgage application volume – the Market Composite Index – eked out a 0.2 percent increase during the week ended August 29, 2014. That was a result of the Refinance Index growing by one percent, but the Purchase Index falling by 2 percent.
Refinance loan requests made up 57 percent of all applications, just up from 56 percent the week before, but the highest percentage in over 17 months.
Low interest rates are mostly responsible for the rise in refinance interest. The average rate on a 30-year fixed rate conventional mortgage dropped to 4.25 percent in the latest week, down from 4.28 percent the week before. While most of the nation’s homeowners who are able to refinance have already done so during the past two years, the historically-low rates are enticing those who haven’t yet to join in.
Those same low interest rates should also be attracting homebuyers to the mortgage table, but prices have risen significantly in the latest year and inventory remains tight in many parts of the country. Add to that a climate of limited mortgage credit for many first-time or less-than-perfect credit buyers and it is clear why low rates are not enough to keep the home purchase applications flowing in.
Adjustable rate mortgages (ARMs) continue to get little attention from refinancers and home buyers. Applications for ARMs represented just 7.8 percent of all loan request volume.
The MBA surveys mortgage bankers, commercial banks and thrifts with its Index covering about 75 percent of all U.S. retail resident mortgage applications.