Mortgage applications to purchase a home fell 7 percent from one week earlier but are 17 percent higher than the same week one year ago. Lower rates may not be pushing volume so much, but they are changing the types of loans borrowers want.
"In the winter we did see a lot of interest from borrowers on the ARM (adjustable rate mortgage) side, but now we're seeing it back to the 30-year fixed," said Chris Hart, CEO of First California, an independent, nonbank mortgage lender. "They want to borrow money for longer than they need it."
The ARM share of applications fell to 5.9 percent from 6.9 percent the previous week. ARMs offer a lower interest rate to start but at a higher risk, as they can adjust higher over time if interest rates rise. With rates falling again, borrowers may feel they don't need to take the extra risk.
Hart said he is seeing more borrowers shopping online, rather than calling directly to lenders. He is also seeing brokers submit loans through his wholesale business without locking in the rate.
"They believe that rates will go lower. I do think there is an underlying trend where people want to pick the bottom," he said.