Despite a considerable drop in long-term mortgage rates, borrowers last week were not breaking down the doors of lenders trying to get a piece of the action, the Mortgage Bankers Association reported today.

According to MBA, home loan application volume fell 2.9 percent last week on a seasonally adjusted basis from the previous week, led by a 4.6 percent decline in the refinance index and a 1 percent drop in the index that tracks purchase loans.

Sizably lower costs provided little impetus to borrow, even with average interest rates last week sinking 39 basis points on 30-year loans and 48 basis points on 15-year loans. MBA reported that the average rate on 30-year fixed-rate mortgages fell from 6.37 percent to 5.98 percent, while the average 15-year fixed rate plunged from 5.72 percent to 5.24 percent. The points that borrowers paid to attain these rates averaged 0.89 on the 30-year loans, down from 1.05 in last week's survey, and 0.97 on the 15-year loans, down from 1.06.

Costs for adjustable-rate mortgages (ARMs), however, climbed in the survey, with the average rate on one-year ARMs rising from 6.72 percent to 6.95 percent and average points gaining from 1.27 to 1.64.

MBA reported that the refinance share of loan applications last week fell to 49.7 percent from 50.6 percent a week earlier, and the ARM share dropped by nearly half, from 15.5 percent to 7.9 percent during the period.

The Mortgage Bankers Association 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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