Mortgage applications were down dramatically last week, declining 24.5 percent from 795. 4 the previous week to 600.6 last week on a seasonally adjusted basis, according to the weekly mortgage applications survey from the Mortgage Bankers Association.

The Purchase Index decreased 9.8 percent to 235.9 from 261.4 one week earlier. It was at its lowest level since the end of 2000.

The decline appears to be because mortgage rates are fluctuating and home prices continue to fall in many places. “Why would I pay $200,000 today when I can pay maybe $180,000 in a couple months or even $150,000," Daniel Penrod, industry analyst for the California Credit Union League, said.

On an unadjusted basis the mortgage index decreased 23.5 percent compared with the previous week and was down 43.9 percent compared to the same week last year.

The refinance share of mortgage activity decreased to 66.7 percent of total applications from 73.2 percent the previous week.

On Tuesday, U.S. Treasury chief Timothy Geithner on Tuesday proposed investing $2 trillion into the banking system to eliminate bad assets and encourage lending at lower rates.
30-year fixed-rate mortgages decreased to 5.19 percent from 5.28 percent
15-year fixed-rate mortgages decreased to 5.00 percent from 5.15 percent
1-year ARMs increased to 6.22 percent from 6.09 percent

Source: Mortgage Bankers Association and Reuters News