Mortgage Applications Decline Once More, Economists Anxious

By Stevie Duffin Updated on 12/14/2012

By Daniel Duffield

For the final week of August, mortgage applications decline 2.5% under the pressure of tight credit circumstances, putting a damper on buyer and refinance activity that had since been strong.

Interest rates continue to fall, with 30-year fixed-rate mortgages for conforming conventional loans falling from 3.80% to 3.78% last week, according to the Mortgage Bankers Association.

With these decreasing rates for interest and applications during the final week of August, many housing economists have become anxious about the future.

In a report, Capital Economics stated that the decline of mortgage applications in August is indicative of a group of mortgage-dependent buyers who do little to stimulate the recovery of the housing market. Capital also said that current credit conditions show little hope for improvement in the near future.

Activity for refinancing lost some of its push, falling 3% and reaching its lowest levels since May. Simultaneously, the purchase index decreased 0.8%.

For jumbo loans, the 30-year fixed-rate mortgage fell from 4.06% to 4.05%, with 30-year FHA loans decreasing to 3.54% from 3.60% the previous week.

Mortgage activity in terms of refinancing remained stable at 79%, and ARM activity rose to 5% of total loan applications.

On 15-year FRMs, average interest rates decreased from 3.12% to 3.10%, according to the MBA. Additionally, the averaged contract interest rate for 5/1 ARMs declined from 2.68% to 2.64%.