Mortgage applications decreased last week despite several lenders now offering interest rates below 4%.
The market composite index fell 3.3% on a seasonally adjusted basis for the period ending Dec. 12, according to the Mortgage Bankers Association. The week before, loan application volume was up 7.3%.
The refinance index held steady week over week, while the purchase index dropped 7%, the Washington-based trade group said.
Refinances accounted for 66% of total applications, which is the highest level since December 2013, the MBA noted. Adjustable-rate mortgages consisted of 6.2% of the overall volume. Mortgages backed by the Federal Housing Administration made up 8.7% of the total activity, while Veterans Affairs applications represented 10.6% and the USDA share was 0.8%.
Interest rates plunged through the course of the week amid plummeting oil prices and concerns regarding global economic growth. The average contract interest rate for 30-year fixed mortgages as well as jumbo loans with balances greater than $417,000 reached lows last seen in May 2013, to 4.06% and 3.99%, respectively.
Furthermore, the average 30-year FHA-backed mortgage was down one basis point, to 3.86%. Additionally, the average interest rate for a 15-year fixed-rate mortgage decreased two basis points, to 3.33%.
“Surprisingly, given this large drop in rates, applications for conventional refinance mortgage did not increase last week, but there was a notable pickup in government refinance applications, which were up 11% for the week, led by an almost 16% increase in VA refinance applications,” said Mike Fratantoni, chief economist for the Mortgage Bankers Association.
The MBA survey covers over 75% of all U.S. retail residential mortgage applications.