WASHINGTON – Residential mortgage applications nationwide plunged last week as capital became more scarce and consumers more wary, the Mortgage Bankers Association said today in its report for the week ended Sept. 26

The trade group’s seasonally adjusted Market Composite Index – a measure of overall mortgage loan application volume – fell last week to 455.4 points. That represented a decline of 23.0 percent from the preceding week’s 421.6 points (READ MORE) and 28.4 percent from its year-ago level.

At the same time, the MBA’s seasonally adjusted Purchase Index fell 10.9 percent last week to 304.8 points, accelerating from the preceding week’s 3.7-percent decline to 315.9 points. The Refinance Index fell 34.7 percent to 1,333.9 points, after falling 0.4 percent to 1,038 points in the week ended Sept. 19.

The percentage of loan applicants who were looking to refinance shrank to 44 percent last week from 51.6 percent the week before, the MBA said. The share seeking adjustable-rate mortgages (ARMs) fell to 3.3 percent from the preceding week’s 4.0 percent of total applications.

Meanwhile, the average contract interest rate for a 30-year fixed-rate mortgage fell to 6.07 percent in the week ended Sept. 29, from 6.08 percent the week before. Also declining was the average rate on a 15-year fixed-rate loan, which edged down to 5.82 percent from the preceding week’s 5.84 percent. The average contract interest rate on a one-year ARM rose, however, to 7.19 percent last week from 7.01 percent the week before.

“We hope Congressional and administration negotiators will immediately regroup and find common ground upon which they can build a new agreement,” John A. Courson, the MBA’s chief operating officer, said in a statement after the administration’s $700 billion rescue package was defeated Monday in the U.S. House of Representatives. (READ MORE) “Restoring liquidity to the credit markets is crucial to both stabilizing Wall Street and keeping the U.S. economy moving forward.”

“The credit crunch is not only preventing financial institutions from being able to access capital but is also preventing large and small businesses from being able to borrow money, money they use to operate their businesses, upgrading facilities and equipment and hiring and paying workers,” Courson said. “If businesses don’t have access to that capital, they will stop growing and the economy will stagnate.”

A Senate vote on a revised bailout measure is expected tonight. (READ MORE)

The MBA indexes – whose baseline of 100 points was set on March 16, 1990 – are based on a weekly survey that covers about half of all U.S. retail mortgage applications. Respondents include mortgage bankers, commercial banks and thrifts.

The Mortgage Bankers Association is a trade group representing the real estate finance industry. Its 3,000 member companies include mortgage firms, commercial banks, thrifts, life insurance companies and others. Additional information, including the MBA’s Weekly Application Survey, is available at www.mortgagebankers.org.