Mortgage activity drops, but average loan at record

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Mortgage activity drops, but average loan at record
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Despite warmer weather, relatively stable interest rates and more homes coming on the market, mortgage applications fell 3.3 percent last week, according to the Mortgage Bankers Association.

Applications to refinance were down 4 percent week-to-week on a seasonally adjusted basis, while applications for loans to purchase a home were down 3 percent. Purchase applications are now down a remarkable 18 percent from a year ago.

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The average contract interest rate for 30-year fixed conforming loan balances ($417,000 or less) rose only slightly, to 4.49 percent from 4.47 percent. Rates have been hovering in a narrow range since last summer, when they jumped a full percentage point.

Refinance loan applications now make up barely half of all volume, down from over 80 percent during the worst of the housing crash. Thousands of borrowers refinanced in 2012 and the first half of 2013, when rates were at record lows, so with rates higher now, there is far less opportunity to benefit from a refinance.

Home sales have largely been disappointing this year, with the National Association of Realtors reporting existing home sales down 7.5 percent in March from a year ago. Sales of the least expensive homes are down even more dramatically, while high-end home sales are seeing gains. Mortgage applications are mirroring that trend.

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The average loan size for purchase applications reached its highest level in the history of the MBA survey at $280,500, coinciding with a sharp rise in overall home prices and the surge in sales of more expensive homes.

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Jumbo loans-those with balances above $417,000-actually have lower average interest rates today than conforming loans. Usually the inverse is true. The average jumbo rate was 4.41 percent last week. Banks usually hold these loans on their own books, since there is very little demand from private investors. Fannie Mae and Freddie Mac, which buy and securitize loans from banks, have raised the fees they charge to the banks; the banks then pass on these fees to borrowers in the form of higher rates.

-By CNBC's Diana Olick



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