After four straight weeks of increase, mortgage applications dropped last week, as a result of the fall in demand for refinancing loans as interest rates rose as reported by a trade association Wednesday.

The Mortgage Bankers Association (MBA), an industry group representing the real estate finance industry today released its Weekly Mortgage Applications Survey for the week ending July 24, 2009.  The Market Composite Index of mortgage applications, which includes both purchase and refinance loans, for the week ended July 24 dropped 6.3% to 495.4 from 528.9 a week earlier.

The Refinance Index fell 10.9 percent to 1862.1 from 2089.7 a week earlier while the seasonally adjusted Purchase Index remained unchanged at 262.0.

The four week moving average for the seasonally adjusted Market Index is up 2.6 percent.  The four week moving average is down 0.5 percent for the seasonally adjusted Purchase Index, while this average is up 5.2 percent for the Refinance Index.

The refinance share of mortgage activity decreased to 52.6 percent of total applications from 55.5 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.5 percent from 4.8 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages increased to 5.36 percent from 5.31 percent, with points decreasing to 0.93 from 1.18 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.75 percent from 4.80 percent, with points increasing to 1.14 from 1.03 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for one-year ARMs increased to 6.66 percent from 6.50 percent, with points decreasing to 0.09 from 0.11 (including the origination fee) for 80 percent LTV loans.

Applications for loans to buy a home, an early indicator of sales, were flat. Lack of interest for purchase loans does not bode well for the hard-hit U.S. housing market, which has otherwise been showing signs of stabilization.

Source: Mortgage Bankers Association, www.mbaa.org