Mortgage applications down after surge
Volume of loan applications down 7.1% last week after posting 112.1% surge on news of Fed's purchase of Fannie, Freddie debt.
NEW YORK (CNNMoney.com) -- Mortgage applications fell last week, edging down after a surge in the week prior when the Federal Reserve's purchase of debt pushed down interest rates. That enticed many homeowners to refinance.
The Mortgage Bankers Association reported Wednesday that mortgage loan application volume fell 7.1% on a seasonally adjusted basis for the week ended Dec. 5.
The week prior, mortgage loan application volume had surged 112.1% on a seasonally adjusted basis.
"While applications may have been somewhat lower last week, it's important to remember we are coming off the previous two week's record numbers. The recent rate drop was a huge incentive for consumers to refinance into fixed rate loans or enter the market to purchase a home," according to a statement from Bob Walters, chief economist with Quicken Loans.
The bulk of the mortgage activity came from refinancing, which made up 73.7% of total applications, an increase from 69.1% the previous week.
Last month, the government announced a plan to buy $500 billion of mortgage-backed securities and $100 billion of debt issued by government-sponsored mortgage financiers Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500).
The moves were intended to reduce interest rates and get more home buyers into the market to stabilize prices.
The 30-year fixed mortgage rate averaged 6.19% the week prior to the government's actions, according to Keith Gumbinger, of HSH Associates, a publisher of mortgage information. The next week, the 30-year mortgage rate fell to 5.57%.
"As long as rates remain in this range, it's likely that strong mortgage activity will continue, as consumers take advantage of a holiday gift that comes in the form of lower or more secure mortgage payments," said Walters.
The Mortgage Bankers Association said 30-year fixed-rate mortgages fell to 5.45% for the week ending Dec. 5 from 5.47% the week prior.
Rates on 15-year fixed-rate mortgages fell to 5.09% from 5.13%, the report said.
The rate on a one-year adjustable-rate mortgage increased to 6.76% from 6.61% the week prior.
The adjustable-rate mortgage (ARM) share of activity decreased to 1.1% from 1.4% of total applications from the previous week.
The refinance index decreased this past week by 0.9% after jumping 203.3% the week prior.
The survey covers approximately 50% of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. The base period and value for all indexes is March 16, 1990, when the index was equal to 100. 
