Mortgage volume drops back again after recent gains

Pedestrians pass a sign advertising mortgages at a Citibank branch in New York.
Scott Mlyn | CNBC
Pedestrians pass a sign advertising mortgages at a Citibank branch in New York.

After a sizable jump in application volume two weeks ago, last week was payback time in the mortgage market.

Total applications fell 4.3 percent week-to-week on a seasonally adjusted basis for the week ending Nov. 21, according to the Mortgage Bankers Association (MBA). This even as mortgage rates dropped.

Applications to refinance a loan decreased 4 percent from the previous week. Applications to purchase a home fell 5 percent after jumping a surprising 12 percent the previous week. Purchase application volume is now off 10 percent from a year ago. This comes amid new data for October showing an increase in existing home sales. The drop in purchase application volume suggests slower sales in November.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.15 percent last week from 4.18 percent the previous week, according to the MBA survey, but rates are even lower now.

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"Rates took a nice little dip today on a combination of another strong Treasury Auction and big month-end trading/hedging," noted Matthew Graham of Mortgage News Daily Tuesday afternoon. "Thirty-year fixed is arguably 3.875 percent again for top tier scenarios, but it's neck and neck with 4.0 percent."

Home sales have not been affected by rate so much as by credit availability. The nation's home builders in particular are concerned that tight credit is hampering the housing recovery.

"We can't get mortgages approved and that's really governing demand," Lennar CEO Stuart Miller told CNBC's "Squawk on the Street" Monday. "It's keeping the range of improvement of the market really constrained into a narrow band."