Mortgage Demand Slips Despite Tax Credits, Low Rates

MortgagesMortgage applications slipped last week despite 30-year fixed rates below 5 percent and still-in-effect homebuyer tax credits.
The Mortgage Bankers Association said its Market Composite Index decreased 1.2 percent on a seasonally-adjusted basis for the week ending Feb. 5, compared to one week earlier.
The MBA’s weekly index measures loan application volumes.
The index that only measures home purchase applications on a seasonally-adjusted basis decreased 7 percent from one week earlier.
Mortgage refinancing applications fared better. The refinance index increased 1.4 percent from the previous week. The refinance share of mortgage activity increased to 69.7 percent of total applications — from 69.2 percent the previous week.
The four week moving average is up a marginal .8 percent for seasonally-adjusted home purchase applications, while this average is up 4.8 percent for the refinance index.
The MBA figures show sluggish home purchase activity despite an average contract interest rate for 30-year fixed rate mortgages of 4.94 percent, a decrease from 5.01 percent. Points increased to 1.06 from 1.04 — including the origination fee — for 80 percent loan-to-value (LTV) ratio loans.
For 15-year fixed-rate mortgages, the rate remained unchanged at 4.33 percent, with points decreasing to 0.95 from 1.17 — including the origination fee — for 80 percent LTV loans.
In November, the Obama Administration extended and expanded its homebuyer tax credit program that offers up to 8,000 for eligible first-time home buyers. But long-time residents can also claim a tax credit worth up to $6,500 if certain conditions are met.
The deadline for qualifying was extended until April 30, 2010. The credit can also be claimed if a binding contract before May 1, 2010 was signed to purchase the property before July 1, 2010.
The MBA’s “Weekly Mortgage Applications Survey” covers more than 50 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990.
Last week, the National Association of Realtors reported that its housing market index measuring pending sales of existing homes grew a modest 1 percent for December – but remains above year-ago levels.

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