Mortgage Applications Down as Refinance Activity Reaches Lowest Level Since 2008

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Mortgage Applications Down as Refinance Activity Reaches Lowest Level Since 2008Data released Tuesday by the Mortgage Bankers Association revealed that U.S. home mortgage applications were down for the second straight week, reaching a 13-year low amid the recent rise in mortgage interest rates.

According to the MBA’s statistics, the mortgage application activity index, which encompasses both home purchases and refinances, went down 6.3 percent with seasonal adjustment, reaching the lowest level on record since December 2000.

Since mortgage rates started spiking in the late spring and early summer months, mortgage applications have taken a precipitous dive, and may likely continue declining if rates go up in reaction to the Federal Reserve’s decision to taper economic stimulus beginning next month. The Fed’s bond purchases, which are presently being made at $85 billion per month, will be pared down to $75 billion effective January 2014.

In addition, refinance activity was also down to a five-year low on the MBA’s statistical report. “Following the Federal Reserve’s taper announcement, mortgage application volume dropped again last week, with rates increasing and refinance application volume falling to its lowest level since November 2008,” said MBA vice president of research and economics Michael Fratantoni.

Refinance activity with seasonal adjustment went down by 7.7 percent, or more than twice the rate of decline (3.5 percent) recorded for home purchase requests. The refinance share of mortgage activity, on the other hand, fell from 66 percent to 65 percent.

In terms of mortgage rates, the MBA’s latest report shows rates at 4.64 percent, an increase of two basis points, for 30-year fixed-rate mortgages. This is just 16 basis points shy of the two-year record high of 4.80 percent recorded in September, or at the tail-end of the so-called “summer spike.”