Despite a sharp decline in interest rates, overall mortgage applications were down 4.9 percent last week on a seasonally adjusted basis from the week before, the Mortgage Bankers Association reported today.

The seasonally adjusted purchase index decreased by 5.5 percent to 375.9 from 397.9 the previous week, and is now at its lowest level since November 2003. The refinance index decreased by 4.1 percent to 1,677.5 from 1,748.7 one week earlier.

The refinance share of mortgage activity, however, increased to 44.3 percent of total applications from 43.7 percent the previous week. This is the highest that the refinance share has been since September 2005. The adjustable-rate mortgage (ARM) share of activity decreased to 26.4 percent of total applications from 27 percent the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.18 percent from 6.36 percent, with points including the origination fee decreasing to 1.06 from 1.11 for 80 percent loan-to-value ratio loans.

Points, which are fees charged by lenders for loan processing, are expressed as a percent of the total loan amount.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.81 percent from 6.04 percent. Points including the origination fee increased to 1.12 from 1.06 for 80 percent loan-to-value ratio loans.

The average contract interest rate for one-year ARMs decreased to 5.9 percent from 5.95 percent, with points including the origination fee rising to 0.79 from 0.77 for 80 percent loan-to-value ratio loans.

Washington, D.C.-based Mortgage Bankers Association is a national association representing the real estate finance industry. The survey covers approximately 50 percent of all U.S. retail residential mortgage originations, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.

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