Mortgage Applications Continue to Fall Despite Low Rates

Even though mortgage interest rates keep falling, it has not been enough to increase U.S. mortgage applications. Total applications for refinance loans and home purchase loans dropped 5.1 percent in the past week, according to the Mortgage Bankers Association, marking the fourth consecutive weekly decrease.

The number of home purchase requests, often a sign of future home sales, fell 2.6 percent in the past week. The unemployment outlook and tightened loan standards continue to be significant issues for many potential homebuyers. Says Celia Chen, a housing economist at Moody’s Analytics Inc as quoted in a Bloomberg article

“Without stronger job growth it’s not possible for consumers to purchase more homes. The other thing constraining the housing market is that there’s not much financing available for buyers unless they have excellent credit. Many folks who would want to buy a house just can’t get a loan to do that.”

People aren’t just shying away from home purchases though. Refinance applications also dropped last week, by 6.2 percent. Refinance loan requests made up 65.6 percent of all applications, down from a 66.4 percent share the week before. One possible reason for the continued decline in refinances may be that the glut of distressed properties on the market are bringing down home prices, which erases home equity for neighboring homeowners in many cases, making it harder to refinance.

At the same time, mortgage interest rates have been staying near historic lows for the past four weeks. Last week, the average rate on a 30-year fixed rate mortgage was 4.60 percent, excluding fees, according to mortgage finance company Freddie Mac. By historical standards, long-term rates have been incredibly low and would normally have spurred a major home buying trend, but other economic conditions (again, strict credit qualifications and a fragile employment scene) are prohibiting borrowers from taking advantage of these fantastic rates.