Refinance Applications Surge on Lower Rates

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage
Application Survey
for the week ending August 12, 2010.   MBA’s Market Composite
Index, a measure of mortgage application volume, increased 4.1 percent on a
seasonally adjusted basis from one week earlier.  This follows a jump of 21.7 percent recorded
in the previous week.  The current increase
on an unadjusted basis was 3.6 percent although the index was 13.5 percent
lower than during the same period in 2010. 
The four-week moving average for the seasonally adjusted Market Index is
up 6.9 percent since last week.

The
increases are being driven by refinancing which accounted for 78.8 percent of
the market this week and 75.6 percent in the previous week.  The refinancing share is the highest it has
been since November 2010.  The index
measuring refinancing continued its upward move, increasing 8.0 percent from a
week earlier.  This index has jumped 38.4
points in two weeks.  The index is down
16.3 percent year-over-year. 

The
Purchase Index decreased 9.1 percent from the previous week on a seasonally
adjusted basis and down 10.1 percent on an unadjusted basis.  The unadjusted index was also down from the
same week in 2010 by 1.1 percent.  The
four-week moving average on the seasonally adjusted Refinancing index rose 10.1
percent while the moving average for the Purchase Index decreased 2.2 percent.

“Unprecedented
volatility in the stock market last week amid additional signs that the economy
has slowed led to further drops in mortgage rates, with the 15-year rate
reaching a new low for the MBA survey,” said Mike Fratantoni, MBA’s Vice
President of Research and Economics. “Purchase application activity fell
sharply over the previous week, likely the result of potential homebuyers
hesitant to purchase in this highly volatile and uncertain environment.”

Fratantoni
continued, “Refinance application volume increased substantially for the
week, although there was substantial variation across the market. In September
MBA’s Weekly Applications Survey will transition to an expanded sample that
covers 75% of the retail market rather than the current sample that covers
roughly 50% of the retail market. That expanded sample showed a significantly
larger increase in refinance applications than the current sample, with some
lenders reporting increases in refinance applications in excess of 50 percent
for the week. The big differences in refinance volumes were likely driven by
the decisions of some lenders not to drop rates last week, largely due to the
need to manage their pipelines.”

Mortgage
rates continued a three-week pull back from their pre-debt ceiling increases.  The average contract interest rate for a
30-year fixed rate mortgages with an 80 percent loan-to-value (LTV) ratio was
4.32 percent with 0.87 point including the origination fee compared to 4.37
percent with 1.07 points a week earlier. 
This is a new low for 2011.  The effective rate also
decreased. 

The
average contract interest rate for 15-year fixed-rate mortgages decreased to 3.47 percent from 3.52 percent, with points increasing to 1.08 from 0.96 for 80 percent LTV loans.
The effective rate also decreased
from last week. The 15-year contract rate is at lowest level in the history of
this survey.

The
adjustable-rate mortgage (ARM) share of activity decreased to 5.8 percent from 6.1 percent of total
applications from the previous week.

The MBA’s loan application survey covers
over 50% of all U.S. residential mortgage loan applications taken by mortgage
bankers, commercial banks, and thrifts. The data gives economists a snapshot
view of consumer demand for mortgage loans. Base period and value for
all indexes is March 16, 1990=100.

Article source: http://www.mortgagenewsdaily.com/08172011_mba_applications_survey.asp

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