NEW YORK ( TheStreet) -- Refinance activity continued to drop, but purchase applications rose in a recent survey conducted by the Mortgage Bankers Association.
Mortgage applications in total decreased 2.5% in the week ended Aug. 23 from one week earlier. On an unadjusted basis, applications declined 3%.
The refinance index decreased 5%. The refinance share of mortgage applications dropped to 60%, the lowest share observed since April 2011.
Refinance activity has been steadily declining as rising rates make it less attractive for many borrowers. The average contract interest rate for the 30-year fixed-rate mortgage with conforming loan balances increased to 4.8% from 4.68%, the highest rate since April 2011.Seasonally adjusted purchase applications, on the other hand, rose 2% from a week earlier. On an unadjusted basis, applications were up 0.3% and 6% higher from one year earlier. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 4.52%, the highest rate since July 2011, from 4.4%. The average contract interest rate for 30-year jumbo loans rose from 4.74% to 4.78%. The average contract interest rate for 15-year fixed-rate mortgages increased to 3.84%, the highest rate since April 2011, from 3.71%. The drop in refinance activity is an earnings headwind for major mortgage banks including Wells Fargo (WFC - Get Report), JPMorgan Chase (JPM - Get Report), Bank of America (BAC - Get Report) and U.S.Bancorp (USB - Get Report) -- Written by Shanthi Bharatwaj in New York. >Contact by Email. Follow @shavenk