Mortgage applications were down modestly during the week ended December 12, with purchase applications accounting for the decline.  The Mortgage Bankers Association said its Market Composite Index, a measure of application volume, lost 3.3 percent on a seasonally adjusted basis from the week ended December 5 and was 4 percent lower on an unadjusted basis.

The Refinance Index was unchanged from the previous week but the portion of all mortgage applications intended for refinancing rose from 64 percent to 66 percent.  This was the highest share of applications captured by refinancing since December 2014. 

Refinance Index vs 30 Yr Fixed

The index reflecting applications for home purchasing was down 7.0 percent on a seasonally adjusted basis from the previous week and 10.0 percent on an unadjusted basis.  The unadjusted index was also 5.0 percent lower than during the same week in 2013.

Purchase Index vs 30 Yr Fixed

Applications for the various government backed mortgage programs were mixed.  The FHA share dipped from 9.0 percent to 8.7 percent while VA mortgage applications increased from 9.6 to 10.6 percent.  Applications for USDA mortgages were unchanged at a 0.8 percent share.

Mike Fratantoni, MBA's Chief Economist said, "Amid plummeting oil prices and heightened concerns regarding global economic growth, interest rates dropped sharply through the course of the week, with longer-term Treasury yields falling more than 10 basis points. The average mortgage rate also dropped during the week, with several lenders offering 30-year fixed-rate loans with rates below four percent. The 30-year conforming rate was at its lowest level since May 2013, and the 30-year jumbo rate averaged 3.99 percent for the week. Surprisingly, Fratantoni said, given this large drop in rates, applications for conventional refinance mortgages did not increase last week, but there was a notable pickup in government refinance applications, which were up 11 percent for the week, led by an almost 16 percent increase in VA refinance applications."

As Fratantoni indicated, mortgage rates eased substantially during the week.  All reported mortgage products were down on both an average contract and an effective rate basis.

The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($417,000 or less) decreased to 4.06 percent, the lowest level since May 2013, from 4.11 percent, with points decreasing to 0.21 from 0.28

The jumbo version of the 30-year FRM, loans, those with balances greater than $417,000, decreased to 3.99 percent, the lowest level since May 2013, from 4.07 percent, with points increasing to 0.28 from 0.16.

Thirty-year FRM backed by the FHA had an average rate of 3.86 with -0.04 point.  The previous week the rate was 3.87 percent with 0.03 point. 

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.33 percent from 3.35 percent.  Points decreased to 0.27 from 0.30.

Applications for adjustable rate mortgages (ARMs) eased from 7.0 percent of the total during the previous week to 6.2 percent.  The most popular ARM, the 5/1 hybrid mortgage, had an average contract interest rate of 3.0 percent, down 11 basis points from the previous week.  Points increased to 0.43 from 0.19.   

Data for MBA's report is derived from its Weekly Mortgage Applications Survey which has been conducted since 1990.  The survey covers over 75 percent of all U.S. retail residential mortgage applications and respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100.  Interest rates presume a loan with an 80 percent loan-to-value ratio and points include the origination fee.