Mortgage application volume continued a downward spiral during the week ended May 15.  The Mortgage Bankers Association's (MBA's) Market Composite Index, a measure of application volume, was down 1.5 percent on a seasonally adjusted basis compared to the previous week.   On an unadjusted basis it was down 2.0 percent. The index has now declined for four straight periods by an average for the adjusted index of 2.97 percent each week.

The decline of the Composite Index this week was driven the largest drop in purchase mortgages since February.  Both the seasonally adjusted and the unadjusted Purchase Indexes were down by 4 percent from the previous week although the unadjusted Purchase Index remained 11 percent higher than during the same week in 2014.  Refinancing increased slightly, gathering a 52 percent share of all applications compared to 51 percent the previous week as the Refinance Index rose 0.3 percent.

Refinance Index vs 30 Yr Fixed

Purchase Index vs 30 Yr Fixed

Mike Fratantoni, MBA's Chief Economist said "Mortgage rates increased last week, and Treasury rates increased to a recent high at mid-week before falling at the end of the week. Overall purchase activity fell for the week, along with conventional refinance volume, but government refinance volume increased. The level of purchase applications remained 11 percent higher than the same week last year, but the drop this week may indicate borrowers being wary of the recent run up in mortgage rates."

The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($417,000 or less) increased to 4.04 percent, its highest level since December 2014, from 4.00 percent.  Points declined to 0.32 from 0.36 and the effective rate increased.

Thirty-year FRM with jumbo loan balances (greater than $417,000) had an average contract rate of 4.04 percent, up from 3.99 percent a week earlier.  Points decreased to 0.25 from 0.33 and the effective rate increased.

The average rate for 30-year FRM backed by the FHA rose 4 basis points to 3.80   percent with points falling to 0.06 from 0.14.  The effective rate increased from the previous week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.26 percent from 3.23 percent while points decreased from 0.40 to 0.30.  There was no change from the previous week in the effective interest rate.

The effective and the contract interest rate for 5/1 adjustable rate mortgages (ARMs) were both down, the contract rate dipping one basis point to 2.99 percent while points eased to 0.45 from 0.46.  The market share of ARMs increased from 6.3 percent to 6.4 percent for the week.

MBA's Weekly Mortgage Application Survey 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 and interest rate information assumes loans with an 80 percent loan-to-value ratio with points including the origination fee.