Smart Borrower Blog

Mortgage Rates Drop But Home Loan Applications Fall

Aug 4th, 2016 @ 12:24 PM by Amber Nelson

During the past week, average rates on U.S. mortgage loans fell even as applications for home loans fell from the previous week.

According to data from mortgage finance company Freddie Mac, the average rate on a 30-year fixed rate conventional mortgage declined to 3.43 percent, with an average 0.5 point, during the week ended August 4, 2016, down from 3.48 percent the week before. Rates on 15-year fixed rate mortgages also dropped, falling to 2.74 percent, with an average 0.5 point, down from 2.78 percent.

The drag on rates came from the recent Federal Reserve decision to hold its rate steady in the range of 0.25 percent to 0.50 percent based on lower-than-expected inflation. The Fed also put forth a “disappointing advance estimate for second quarter GDP,” said Freddie Mac Chief Economist Sean Becketti. The Fed cut its expected rates hikes to two for the rest of the year, down from four. In response, “mortgage rates, which had moved up 7 basis points over the past three weeks, responded by erasing most of those gains…for the 30-year fixed-rate mortgage.”

During the same time, fewer American consumers applied for a mortgage loan. The Mortgage Bankers Association’s market composite index -applications-decrease-in-latest-mba-weekly-survey – a measure of total home loan application volume – sank 3.5 percent from a week earlier. Refinance requests plunged 5 percent while home purchases applications decreased 2 percent.

“Both refinance and purchase application volume has trended down over the past three weeks, after rate reductions spurred by the Brexit vote drove increased activity,” said Lynn Fisher, the MBA’s vice president of research and economics. “As the total pool of borrowers who can benefit from a refinance continues to shrink, we continue to see weeks where small declines in average mortgage rates like we saw last week do not spur additional mortgage application activity.”

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

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