The Mortgage Bankers Association (MBA) reported declines in both refinancing and purchase activity in the week ending June 18 despite lower mortgage rates.
The MBA reported the average contract interest rate for 30-year fixed rate mortgages declined seven basis points to 4.75% - its lowest level since mid-May 2009.
Meanwhile, the Refinance Index fell 7.3% to ~3209, while the Purchase Index slipped 1.2% to ~178.5.
As a percent of total applications, refinancing share was 73.8%, down from 74.8% in the previous week. ARM share was also lower to 4.8% from 5.2%.
Many borrowers are unable to refinance due to the ongoing tight credit conditions with mortgage principal balances significantly above home values.
In addition, a 10-year note yield under 2.80% is needed to push mortgage rates low enough to spark refinancing activity, particularly in 2009 vintage 4.5s and 5s.