Mortgage Activity Decreases Despite Lower Rates

Despite lower interest rates, mortgage activity declined in the December 14 week, with purchase applications down a seasonally adjusted 7 percent from the prior week and applications for refinancing down 2 percent as ongoing financial market volatility and economic uncertainty likely dissuaded some potential borrowers. The decline took the year-on-year gain in unadjusted purchase applications down 2 percentage points to 2 percent and increased the refinance share of mortgage activity by 2 percentage points to 43.5 percent, its highest share since February. After dropping sharply by 12 basis points in the prior week, the average interest rate on 30-year fixed-rate conforming mortgages ($453,100 or less) decreased by another 2 basis points to 4.94 percent, its lowest level since September. The 23 basis point drop in mortgage rates since their peak last month is welcome news to a housing market that has been progressively weakened for most of the year by a headwind of rising rates and the resulting decline in affordability. Later this morning the release of existing home sales data for November will shed further light on the nation's housing sector.

Please note that the Mortgage Bankers Association will not release its weekly report next week due to the holidays and will release the mortgage applications survey results for 2 weeks on Thursday, January 3, 2019.