Banks Find Fewer Takers for Mortgages

One reason home sales are down may be that consumers who would like to buy a home can't get a mortgage. It's not that they can't afford one -- rates are rising but are still near historic lows.

Rather, banks have toughened lending standards in the wake of the collapse of the housing market, and the days when almost anyone could get a loan, even if he really couldn't afford it.

But the pendulum appears to have swung far the other way. In its latest report, the Mortgage Bankers Association said its Market Composite Index, a measure of mortgage loan application volume, decreased 12.9 percent on a seasonally adjusted basis from one week earlier. 

On an unadjusted basis, the Index decreased 12.0 percent compared with the previous week. The results do not include an adjustment for the Martin Luther King holiday.

Refinancing also down

Not only are consumers not borrowing money to buy homes, those who have homes are not refinancing existing mortgages as much. That should come as no surprise since rates are now rising. The time to refinance was a month or two ago.

The Refinance Index was down 15.3 percent from the previous week and reached its lowest level since January 2010.  The seasonally adjusted Purchase Index decreased 8.7 percent from one week earlier.

The Purchase Index is at its lowest level since October 2010.  The unadjusted Purchase Index decreased 3.1 percent compared with the previous week and was 20.8 percent lower than the same week one year ago.

The four week moving average for the seasonally adjusted Market Index is down 1.0 percent.  The four week moving average is down 3.7 percent for the seasonally adjusted Purchase Index, while this average is down 0.1 percent for the Refinance Index.

The refinance share of mortgage activity decreased to 70.3 percent of total applications from 73.0 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.2 percent from 5.0 percent of total applications from the previous week.

Rates still under five percent

The average contract interest rate for 30-year fixed-rate mortgages increased to 4.8 percent from 4.77 percent, with points decreasing to 1.19 from 1.20 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This week's increase in the rate followed three consecutive weekly decreases.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.12 percent from 4.16 percent, with points increasing to 1.26 from 0.90 (including the origination fee) for 80 percent LTV loans.