Mortgage application volume declined 2.7 percent for the week ending Sept. 28, despite a drop in interest rates, according to the Mortgage Bankers Association's weekly application survey.
The MBA's application index fell to 636.7 from 654.2 the previous week. The index peaked at 1,856.7 during the week ending May 30, 2003, at the height of the housing boom.
An index value of 100 is equal to the application volume on March 16, 1990, the first week the MBA tracked application volume. A reading of 636.7 means mortgage application activity is 6.367 times higher than it was when the MBA began tracking the data.
The survey provides a snapshot of mortgage lending activity among mortgage bankers, commercial banks and thrifts. It covers about 50 percent of all residential retail mortgage originations each week.
The mortgage industry was rocked this year by skyrocketing default rates for subprime mortgages, or those given to people with weak credit histories.
After years of loose lending standards, banks were confronted with millions of homeowners who had difficulty making their monthly payments, particularly those who had taken adjustable-rate mortgages with low introductory "teaser" rates.
Refinance volume fell 3.8 percent during the week, while purchase volume dropped 1.8 percent. Refinance volume accounted for 46 percent of applications during the week ending Sept. 28, down from 46.4 percent the previous week.
The average interest rate for traditional, 30-year fixed-rate mortgages fell to 6.32 percent from 6.38 percent the prior week.