Fewer Purchase Applications Causes Sizeable Mortgage Market Decline

Published

April 27, 2011

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The number of applications for new home loans fell by a seasonally adjusted 13.6 percent in the week ending April 22, accounting for a 5.6 percent overall drop in the market, according to the latest statistics from the Mortgage Bankers Association. There was also a slight decrease in the number of consumers who sought to refinance their existing home loan.

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Overall, refinances dropped just 0.6 percent, and the overall share of the mortgage market for that financial option rose to 61.6 percent, the highest rate in a month, the report said. In the previous week, the refinance share was 58.5 percent.

“Purchase applications fell last week, driven primarily by a sharp decrease in government purchase applications as new, higher FHA premiums went into effect,” said Michael Fratantoni, MBA’s vice president of research and economics. “This decrease reverses a 20 percent increase in government purchase applications over a four week period, which was likely driven by borrowers attempting to beat this deadline.”

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The four-week moving average for the mortgage market is down 2.4 percent, largely as a result of fewer finances having been sought as a result of higher interest rates, the report said.

Refinances typically drop when the average mortgage rates approach or surpass 5 percent, as many may believe they won’t save enough money to make such an option financially feasible.