Remarkable Interest Rates But New Loan Applications Down 12.2%

That was the message Wednesday from the Mortgage Bankers Assn., which released its survey of last week's applications for home loans.

An index of refinance activity fell 14.3% and purchase applications were off 5.7% on an adjusted basis.

The lender trade group said purchase applications were still depressed because of the expiration of federal home-buying tax credits at the end of April.
By contrast, refinance applications dropped for the first time in a month despite 30-year mortgage rates averaging 4.8%. (Refis still made up 72% of all mortgage applications.)

"Despite the historically low rates, many homeowners have already refinanced recently, remain underwater on their mortgages, have uncertain job situations, or have damaged credit following this downturn, and therefore may not qualify to refinance,” said Michael Fratantoni, the mortgage group's vice president of research and economics.

Mortgage rates are being kept low because they tend to track the yield on the 10-year U.S. Treasury bond, which has fallen again because of surging demand for Treasuries, as my colleague Tom Petruno discussed here Wednesday.
The weekly Freddie Mac survey calculates what lenders are offering to people with solid credit and 20% down payments or home equity, and can run slightly higher than what savvy borrowers are able to negotiate. It tracks smaller conforming mortgages, not a jumbo loan such as Thornberg's.

Freddie said the average 30-year fixed rate was at 4.72% early this week, the lowest level this year and nearly as low as the record for the survey, 4.71%, which was set last December.

The 15-year fixed loan was at 4.17%, the lowest since Freddie Mac began reporting on such loans in 1991. The borrowers would be paying the lender 0.7% of the loan balance in upfront fees and discount points to get the 15- and 30-year fixed rates.