Mortgage application volume was down 6.7% last week, according to the Mortgage Bankers Association's weekly application survey index.

The index hit the lowest level since November 2003 at 529.6 for the week ended June 23. The number of mortgage applications is down 31% when compared to last year at this time.

The purchase index declined 6.2%, while the refinance index was down 7.5%. Refinance applications are down 47% in the past year.

Interest rates were up sharply. The average rate on a 30-year, fixed-rate mortgage was 6.86%, up from 6.73 a week prior. The average rate for a 15-year, fixed-rate mortgage was 6.49%, an increase from 6.37%. One-year adjustable rate mortgage rates also increased to 6.36% from last week's 6.22%.

The decline in mortgages and increase in interest rates coincides with the Federal Reserve Board meeting this week. The Fed is expected to increase the benchmark rate to 5.25%.

The MBA's purchase index is expected to decline by another 20%, according to economists. The decline in purchase applications has been much steeper than the drop in U.S. home sales. New-home sales are down by 6% for the year, while existing home sales are down 7%.

Refinancings made up 35.3% of total applications, while adjustable-rate mortgages accounted for 29.1% of applications.

The spread between the rate on a one-year adjustable-rate mortgage and a 30-year, fixed-rate mortgage is only 50 basis points -- the narrowest spread in the past five years. When the spread is narrow, a buyer cannot reduce his or her monthly payment significantly by choosing an adjustable-rate mortgage.

Martin Lukac represents http://www.RateEmpire.com and http://www.1AmericanFinancial.com, a finance web-company specializing in real estate and mortgage rates. We specialize in daily updates, mortgage news, rate predictions, mortgage rates and more. Find low home loan mortgage interest rates from hundreds of mortgage companies! Article Source: http://EzineArticles.com/?expert=Martin_Lukac