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Mortgage application activity dropped during the week ending July 26, according to data from the Mortgage Bankers Association (MBA).

The Market Composite Index, the MBA’s measure of mortgage loan application volume, decreased 3.9% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the index was down by an even 4%. The adjustable-rate mortgage share of activity decreased to 5.7% of total applications.

The Refinance Index decreased 7% from the previous week – although it was also 32% higher than the same week one year ago – and the refinance share of mortgage activity decreased to 38.2% of total applications from 39.7% the previous week.

Among the federal programs, the FHA share of total applications increased to 14.2% from 13.4% the week prior while the VA share of total applications decreased to 13.5% from 14.8% and the USDA share of total applications inched up to 0.5% from 0.4%.

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Mike Fratantoni, MBA’s senior vice president and chief economist, observed, “In recent weeks, there have been some small bursts of refinance activity, particularly for FHA and VA loans. Last week, VA refi application volume dropped sharply, which drove the aggregate result. Borrowers may be waiting for signs that mortgage rates will drift lower as the Federal Reserve begins to cut short-term rates. Purchase volume also dropped slightly because of ongoing affordability challenges.”

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