Mortgage application volume falls 14.2 percent as rates rise

Mortgage application volume fell 14.2 percent during the week ending April 18, according to the Mortgage Bankers Association's weekly application survey.

The MBA's application index fell to 637.6 from 743.4 the previous week.

Refinance volume fell 20.2 percent, while purchase volume declined 6.4 percent. Refinance applications accounted for 49.2 percent of total applications compared with 53.5 percent a week earlier.

The index peaked at 1,856.7 during the week ending May 30, 2003, at the height of the housing boom.

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This article addresses the declining amount of mortgage applications being completed which shows the declining housing market. This article also addresses the rising interest rates of items which prevent some from purchasing or investing. Both of these factors show the declining United States's economy which many hope will not last much longer.

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The next shoe to drop in housing

Investors are now shunning mortgage-backed securities issued by government sponsored enterprises Fannie Mae and Freddie Mac, which have been critical in keeping the real estate market from completely falling apart.

Some fear this development will make it harder for people, even those with strong credit histories, to get a home loan.

"Even if you have good credit, you don't know if they are going to give you a loan or not," said Joseph Mason, a senior fellow at the Wharton School of the University of Pennsylvania.

And for those who can still get a loan, the tremors in the mortgage-backed securities market has made loans more expensive for borrowers. As the prices of mortgage-backed securities have fallen, their yields have risen, leading to higher mortgage rates.

The national average rate on a 30-year fixed-rate mortgage was 5.96% Thursday, after jumping to 6.08% earlier this week, according to Bankrate.com. Rates on a 30-year fixed mortgage were about 5.90% a week ago. A borrower looking for a 5-year adjustable-rate mortgage would pay 5.71% today, up from around 5.03% a week ago.

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The real estate market has been close to falling apart for sometime and the two enterprises that have kept the market somewhat stable, Fannie Mae and Freddie Mac, are being ignored by investors. This development will make it harder for people, even those with strong credit histories, to get a home loan. For those people who can somehow receive a loan, the price of receiving that loan will be more expensive. Because mortgage-backed securities have fallen, yields have risen, therefore, mortgage rates are higher.

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