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Mortgage Application Rebound Continues as Rates Drop
A significant drop in mortgage rates triggeredrna surge in refinancing activity during the week ended October 10. The Mortgage Bankers Association (MBA) said itsrnMarket Composite Index, a measure of loan application volume, rose 5.6 percentrnon a seasonally adjusted basis compared to the week ended October 3 and was uprn6 percent unadjusted. </p
Thernincrease was due entirely to a jump in refinancing applications. MBA’s RefinancernIndex was 11 percent higher than during the previous week and the refinancernshare of applications rose to 59 percent from 56 percent.</p
Refinance Index vs 30 Yr Fixed</p
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“Growingrnconcerns about weak economic growth in Europe caused a flight to quality intornUS assets last week, leading to sharp drops in interest rates. Mortgage ratesrnfor most loan products fell to their lowest level since June 2013,” said MikernFratantoni, MBA’s Chief Economist. “Refinance application volume reached thernhighest level since June 2014 as a result, with conventional refinance volumernat its highest since February 2014.” </p
The surge inrnmortgage applications did not extend to applications for home purchase mortgages. Thernseasonally adjusted Purchase Index fell 1 percent compared to the previous weekrnand the unadjusted index was down 0.3 percent. On an unadjusted basis thernPurchase Index was 4 percent lower than during the same week in 2013.</p
Purchase Index vs 30 Yr Fixed</b</p
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AsrnFratantoni said, both contract and effective interest rates declined across thernboard. Conventional 30-year fixed-raternmortgages (FRM) with a loan value of $417,000 or less had an average contractrnrate of 4.20 percent with 0.17 point, down from 4.30 percent with 0.19 pointrnthe previous week. </p
Jumborn30-year FRM with loan balances over the conforming amount had a contract raternof 4.14 percent, down 7 basis points from a week earlier and the lowest raternsince May 2013. Points decreased to 0.10rnfrom 0.29.</p
Thernaverage rate for an FHA-backed 30-year FRM fell to the lowest level since Junern2013, 3.90 percent with 0.08 point. Thernprevious week the rate had been 4.00 percent with 0.15 point. </p
A 7 basisrnpoint decrease brought the contract rate for a 15 -year FRM down to its lowestrnlevel since this past July, 3.41 percent. rnPoints declined to 0.28 from 0.32. </p
Thernaverage contract interest rate for 5/1 adjustable rate mortgages (ARMs)rndecreased to 3.05 percent, the lowest since June 2013, from 3.20 percent, Points edged up to 0.38 from 0.37. Applications for ARMs made up 8 percent of therntotal for the week compared to 7.8 percent the week before. </p
MBA’srnapplication indices are derived from the results of its Weekly MortgagernApplication Survey. The survey isrnconducted among mortgage bankers, commercial banks and thrifts and covers overrn75 percent of U.S. retail mortgage applications. Interest rate data assumes arnmortgage with a loan-to-value ratio of 80 percent and points include thernorigination fee. The base period and valuernfor the indexes is March 16, 1990=100.
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Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.
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