Mortgage applications drop even as loan rates hit yearly lows

The number of people applying for mortgages dropped last week as even historically low home loan rates aren't enough to jump-start the sluggish housing market. 

Mortgage applications decreased 2.6 percent for the week ended Dec. 16, according to the Mortgage Bankers Association's (MBA) weekly survey.

Meanwhile, refinancing dropped 1.6 percent while purchases decreased 4.9 percent from a week earlier. 

The four-week moving average, a better measure than the weekly figure, for the seasonally adjusted market index is up 0.26 percent — the refinance index is up 1.32 percent while the average is down 1.53 percent for the seasonally adjusted purchase index.

"Continued anxiety surrounding the fragile economic situation in Europe led interest rates lower last week," said Michael Fratantoni, MBA's vice president of research and economics. 

"Remarkably low rates are not enough, as many homeowners continue to hold back due to lack of equity in their properties, poor credit and a weak job market," he said. 

The refinance share of mortgage activity reached its highest point this year — 80.7 percent of total applications — from 79.7 percent the previous week. 

The adjustable-rate mortgage (ARM) share of activity decreased to a yearly low of 5.1 percent from 5.6 percent of total applications from the previous week.

The average size of all loans for home purchase was $217,774 in November, up from $213,430 the previous month. 

The average loan size for a refinance increased from $217,153 in October to $220,523 in November. 

Government purchase loan sizes declined from October to November, from $186,263 to $170,742. The largest purchase and refinance loans were made in the Pacific region at $308,307 and $304,509, respectively. 

Mortgage rates continued to drop to their lowest levels this year, although they haven't done much to spur activity. 

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.08 percent from 4.12 percent, the lowest rate this year.

Those rates on jumbo loan balances (greater than $417,500) also dropped to the lowest rate of the year, to 4.44 percent from 4.47.

The average contract interest rate for 30-year fixed-rate mortgages backed by the Federal Housing Administration decreased to 3.93 percent from 3.94, also the lowest rate this year.

Rates for 15-year fixed-rate mortgages decreased to 3.39 percent from 3.44, also the lowest rate of the year. 

On 5/1 ARMs, the rates are down to 2.90 percent, also the lowest rate of the year, from 2.93 percent.