U.S. mortgage applications for purchase dropped to a nearly 15-year low last week, according to a new report from the Mortgage Bankers Association (MBA). As noted by the industry group, the drop is attributed to buyer worries that the economy is too weak to take on a mortgage loan.
Loan Requests Dropped 5.7 Percent
According to the MBA, seasonally-adjusted index of mortgage application activity, which includes home purchase demand and refinancing, dropped 2.4 percent in the week ended Aug. 19. Further, the seasonally-adjusted gauge of loan requests fell 5.7 percent–the lowest level since Dec. 1996.
The report found refinancing activity alone slipped 1.7 percent. This is a shift from previous weeks where it had been the only area of the sector showing promise due to record-low mortgage rates. However, with rates increasing again last week, some prospective buyers withdrew their interest.
Economy Too Unstable to Buy
Mike Fratantoni, MBA’s vice president of research and economics, stated the economy is playing a significant role in the reluctance to get out there and buy homes.
“Another week of volatile markets and rampant uncertainty regarding the economy kept prospective homebuyers on the sidelines, with purchase applications fall to a 15-year low,” Fratantoni said.
He went on to explain the decline impacted borrowers across the board. In fact, purchase applications for jumbo loans fell by more than 15 percent while purchase applications for the government housing programs dropped by 8.2 percent.
While mortgage rates only increase 0.7 percent from the week prior to 4.39 percent–still near record lows–many think the increase signals an upswing in rates and suspect prospective home buyers simply don’t want to take on a higher rate with so much economic uncertainty to bear.
