Mortgage Applications Slide After Labor Day

Mortgage rates increased slightly last week but still remain at historically low rates. Even so, demand for mortgages, refinancing, and purchases all fell in the week, according to the Mortgage Bankers Association. 

Interest rates for a 30-year loan moved up 6 basis points to 5.08% in the four-day period ending Sept. 11. But the Market Composite Index ― which tracks the volume of mortgage applications ― fell 8.6% the week, following a massive 17% increase in the prior week.

The MBA said seasonal adjustment issues relating to the Labor Day shortened week may be a factor in the slide, but the unadjusted data isn’t exactly encouraging. Without adjustments, the composite index fell 18.3% compared to the prior week, and 18.7% relative to last year.

Refinances, which accounted for 61% of all loans in the period, fell 7.4% in the period after soaring 22.5% in the week before (the biggest five-day gain since mid-March.) The slide ends a four-week streak and drags the 4-week average down to +5.2%.

Pressure for prospective buyers to cut a deal now is building as the government’s $8,000 tax credit for first-time home buyers expires at the end of November. But that pressure failed to help the Purchase index last week as it fell 10.3%.

Mortgage rates remain low across the country remain low to spur demand for new purchases. Yesterday, a report from Zillow.com showed the state average is below 5.30% ― an historically low rate ― in all 50 states. Lenders in Virginia offer the lowest rates with an average of 4.96%, while rates in Illinois are currently the highest at 5.23%.