July 1 (UPI) -- Mortgage applications around the country dropped 1.8 percent last week from a week earlier even though rates tumbled to a new low, a new national report from the Mortgage Bankers Association said Wednesday.
The association's Weekly Mortgage Applications Survey said the drop was based on a seasonally-adjusted figure from one week earlier. The unadjusted drop was 2 percent from the previous week, the group noted.
The survey's refinance index decreased 2 percent from the previous week but was 74 percent higher than the same week a year ago. The seasonally-adjusted purchase index decreased 1 percent from one week earlier while the unadjusted purchase index fell 2 percent compared with the previous week.
That index was 15 percent higher than the same week one year ago, the association said.
"Mortgage applications fell last week despite mortgage rates hitting another record low in MBA's survey," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a statement. "Investors are contemplating the risks of the recent resurgence of COVID-19 cases to the labor market and economy, and Treasury rates and mortgage rates are moving lower as a result."
Kan said the fall in mortgage applications for a second consecutive week comes after two straight months of solid growth.
"The weakening in activity is potentially a signal that pent-up demand is starting to wane and that low housing supply is limiting prospective buyers' options," Kan said. "The average purchase application loan size increased to a record high in our survey -- more proof that tight inventory conditions are leading to faster price growth."
Matthew Graham, chief operating officer at Mortgage News Daily, said the economic contraction resulting from coronavirus is one factor in the low-rate environment.
"The rest of the heavy lifting has been done by the Federal Reserve, which stepped in when markets were experiencing the height of their recent volatility in early March 2020," Graham said.
But low rates, which have been below 3.5 percent since March, may not be enough to boost mortgages as rising coronavirus cases contribute to economic uncertainty.