FHA Fee Hike Prompts Surge in Purchase Applications

The pending increase in FHA guaranteernfees pushed applications for government-backed purchase mortgages up 7 percent buttrnthe overall volume of mortgage activity dropped during the week ended March 29.  There was a 4.0 percent drop in the MortgagernBankers Association’s (MBA) Market Composite Index compared to the week endedrnMarch 22 on both a seasonally adjusted and an unadjusted basis.</p

Despite the surge in government-backed mortgagernactivity the overall volume of applications for financing home purchases was uprnonly 1 percent on an adjusted basis from the previous week and up 2 percent onrnan unadjusted basis.  The unadjusted PurchasernIndex was 4 percent higher than during the same week one year earlier.</p

ThernRefinance Index decreased 6 percent from the previous week and the sharernof refinancing applications decreased to 74 percent of total applications fromrn75 percent the previous week.  The HomernAffordable Refinance Program (HARP) accounted for 28 percent of refinancing comparedrnto 29 percent the previous week.</p

“Total purchase applications increased last week, due to anrnalmost 7 percent increase in purchase applications for government loans. rnThis was likely driven by borrowers applying for loans prior to the scheduledrnincrease in FHA premiums that took effect on April 1,” said Mike Fratantoni,rnMBA’s Vice President of Research and Economics.  “On a year over yearrnbasis, purchase applications are up about 4 percent, in line with the trend wernare seeing in home sales volumes.” </p

Purchase Index vs 30 Yr Fixed</b</p

The average contract interest rate for 30-year fixed-raternmortgages backed by the FHA decreased to 3.48 percent from 3.51 percent,<bwith points decreasing to 0.38 from 0.43.</p

The average contract interest rate for 15-year fixed-raternmortgages decreased to 2.99 percent with 0.36 point from from 3.02 percent,rnwith 0.42 point</p

Five percent of mortgage applications during the week werernfor adjustable rate mortgages (ARM), unchanged from the previous week.  The average contract interest rate for 5/1rnARMs, the most popular of these products, increasedrnto 2.60 percent from 2.58 percent, with pointsrnunchanged at 0.32 and the effectivernrate increased</p

Ratesrnquoted are for loans with an 80 percent loan to value ration and points includernthe origination fee.  </p

Mortgagernvolume and interest rate data is collected by MBA from its Weekly Mortgage ApplicationsrnSurvey which it has conducted since 1990. Respondents include mortgage bankers,rncommercial banks and thrifts.  Base period and value for all indexes isrnMarch 16, 1990=100.

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