Mortgage applications sink to multiyear low

updated 8:41 a.m. ET Aug. 20, 2008

NEW YORK - Mortgage application volume fell last week to its lowest levels in more than six years, the Mortgage Bankers Association said Wednesday.

The fall in application volume is the latest sign of a struggling housing market. On Tuesday, a Commerce Department report showed construction of homes and apartments fell in July to the lowest level in more than 17 years.

And while fewer new homes are being built, fewer customers are also refinancing existing mortgages. A sharp drop in refinance volume in recent weeks has been the leading driver of declining application volume.

The trade group’s application index fell to 419.3 during the week ended Aug. 15, a 1.5 percent decline from the week prior. Application volume is down 61 percent from its 2008 peak in February.

The MBA’s index peaked at 1,856.7 during the week ending May 30, 2003, at the height of the housing boom. An index value of 100 is equal to the application volume on March 16, 1990, the first week the MBA tracked application volume.

The survey provides a snapshot of mortgage lending activity among mortgage bankers, commercial banks and thrifts. It covers about 50 percent of all residential retail mortgage originations each week.

Application volume fell despite a drop in interest rates as well. The average rate for traditional, 30-year fixed-rate mortgages fell to 6.47 percent during the week ended Aug. 15, from 6.57 percent the previous week.

The average rate for 15-year fixed-rate mortgages, often a popular option for refinancing a home, fell to 5.99 percent from 6.17 percent. The average rate for one-year adjustable-rate mortgages fell to 7.07 percent from 7.15 percent.

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