Mortgage Applications Drop!

Despite a significant drop in mortgage rates during the week ending December 21st; mortgage application volume actually fell 7.6%. The Mortgage Bankers Association reported an index rating of 603.8 from 653.8 in the previous week. What does this mean? MBA started tracking application volume on March 16, 1990 at an index value of 100; so a rating of 603.8 simply means that mortgage application volume is 6.038 times higher than it was when the MBA first started tracking this statistic.

This particular index was at its peak on May 30, 2003 with a rating of 1,856.7 when the housing boom was in full force. This survey simply provides a snapshot of mortgage lending activity among mortgage bankers, commercial banks and thrifts. Keep in mind this only covers about 50% of all residential mortgage lending activity. Of the mortgage activity surveyed 50% were refinance applications; this could mean an increase in credit usage as many homeowners are "tapping" their equity to rid themselves of dangerous credit card debt.

Why would this index be down when rates were relatively lower? That is the question that is puzzling wall street this morning. Many believe this is a sign that the housing problems are not on the decline as money may still be harder to come by. My personal explanation is simple. Most people have their minds on other items this time of year rather than worrying about their mortgage or purchasing a home. The holidays are a time for family, reflection, and relaxation; mortgages do not seem to slither there way in there during this time of year.

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