Mortgage borrowers are clearly getting used to near-record low interest rates. A drop in rates last week did nothing to juice refinances, which are usually very rate-sensitive.
Total mortgage application volume decreased 0.7 percent on a seasonally adjusted basis for the week from the previous week, according to the Mortgage Bankers Association.
Refinance volume, which now accounts for 62.7 percent of all applications, fell 2 percent from the previous week, seasonally adjusted, but were up 34 percent from a year ago, when mortgage rates were higher. Mortgage applications to purchase a home increased 1 percent for the week and were 10 percent higher than the same week one year ago.
"Treasury rates fell through the course of last week, as the Fed left their target rate unchanged, and concerns grew again about global growth, particularly in Europe and Japan," said Michael Fratantoni, chief economist for the MBA. Refinance volume dipped for the week, but purchase application volume continues to show 2016 as a strong year."
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.66 percent from 3.70 percent, with points decreasing to 0.33 from 0.38 (including the origination fee) for 80 percent loan-to-value ratio loans. The average rate for jumbo loan balances fell to 3.64 percent from 3.69 percent.
"Average purchase loan size increased again, indicating that the strength is at the higher end of the market," added Fratantoni.
That is likely because there are more homes for sale at the higher end of the market. Entry-level supply has dropped dramatically this year, and brokers blame that for the drop in August home sales. Buyer demand in August increased slightly from July, according to real estate brokerage Redfin, which logged more offers written; the supply drain, however, resulted in fewer actual sales.
"The 2016 home-buying season has been less ferocious than it was the past three years. Bidding wars are a tad less frequent, price growth is moderating and even in hot markets, homes are sitting on the market a bit longer. All told, this is not a market in decline, it's a market finally finding its normal," said Redfin chief economist Nela Richardson.
Mortgage rates continued to fall this week, hitting the lowest in nearly two months by Tuesday. Rate moves in general have been very small, with most of the changes coming in upfront costs, which include origination and processing fees. This week, however, real rates dropped about an eighth of a percentage point, according to Mortgage News Daily.