Mortgage Lending Activity Remains Weak Despite Lower Interest Rates

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Mortgage Lending Activity Remains Weak Despite Lower Interest RatesThough, mortgage interest rates have steadily declined and are now substantially lower than they were one year ago, overall lending activity has remained laggard, according to new data from the Mortgage Bankers Association.

The MBA’s latest weekly report, which covers the week ended July 11, 2014, shows that home loan applications (purchases and refinances) declined 3.6 percent week-over-week, with seasonality taken into account. The Refinance Index declined an additional 0.1 percent from the week prior, adding to the 13 percent cumulative decline already recorded over the past month. The Purchase Index with adjustments for seasonality declined 8 percent from theprevious week, reaching its lowest level since February 2014. Without seasonality, the Purchase Index did improve 16 percent week-over-week, but remained 17 percent lower on a year-over-year basis.

It has been worth mentioning that the mortgage space has been going through some struggles, despite lower mortgage rates being there to potentially sate consumers and encourage them to stop sitting the fence. For instance, Wells Fargo & Co. (NYSE: WFC) reported $47 billion in mortgage originations for quarter two 2014, a slight uptick from the March 2014 quarter, but still far below the record $139 billion in originations in quarter three 2012. Also, JPMorgan Chase & Co. (NYSE: JPM) also experienced a 66 percent year-over-year decline in mortgage originations for the quarter ended June 2014.

In other MBA statistics, the refinance share of mortgage activity enjoyed a much-needed surge in the past week, rising from 52 percent of all applications to 54 percent last week. This is a peculiar, though welcome phenomenon, considering how the refinance share had dropped in 14 of the previous 23 weeks.

Mortgage interest rates were slightly higher last week, but relatively firm from the week prior. 30-year fixed mortgage rates climbed one basis point from 4.32 percent to 4.33 percent, while 15-year fixed mortgage rates also edged up by a single hundredth of a percentage point, moving from 3.40 percent to 3.41 percent.