Home Loan Demand Rebounds from Holiday Influenced Slowdown

The Mortgage Bankers Association (MBA) today released its WeeklyrnMortgage Applications Survey for the week ending January 28,rn2011. </p

The MBA’s loan application survey covers over 50% of all U.S. residentialrnmortgage loan applications taken by mortgage bankers, commercial banks, andrnthrifts. The data gives economists a snapshot view of consumer demand forrnmortgage loans. In a falling mortgage rate environment, a trend of increasingrnrefinance applications implies consumers are seeking out lower monthlyrnpayments. If consumers are able to reduce their monthly mortgage payment andrnincrease disposable income through refinancing, it can be a positive for therneconomy as a whole (may boost consumer spending. Also allows debtors to payrndown personal liabilities faster). A trend of declining purchase applicationsrnimplies home buyer demand is shrinking.</p

Excerpts from the Release…</p

The Market Composite Index, a measure of mortgage loan application volume,rnincreased 11.3 percent on a seasonally adjusted basis from one weekrnearlier.  On an unadjusted basis, the Index increased 13.2 percentrncompared with the previous week.  The previous week did not include arnholiday adjustment for Martin Luther King, Jr. Day.    </p

The Refinance Index increased 11.7 percent from the previous week.  rnThe four week moving average is up 1.7 percent. The refinance share of mortgagernactivity decreased to 69.3 percent of total applications from 70.3 percent thernprevious week. </p

This is the lowest refinance share observed in the survey sincernthe week ending May 14, 2010.</p

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The seasonally adjusted Purchase Index increased 9.5 percent from one weekrnearlier.  The unadjusted Purchase Index increased 16.7 percent comparedrnwith the previous week and was 21.4 percent lower than the same week one year ago.  rnThe four week moving average is down 1.5 percent.</p

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The average contract interest rate for 30-year fixed-rate mortgagesrnincreased to 4.81 percent from 4.80 percent, with points decreasing to 1.02 fromrn1.19 (including the origination fee) for 80 percent loan-to-value (LTV) ratiornloans.  The effective rate decreased from last week.   </p

The average contract interest rate for 15-year fixed-rate mortgagesrnincreased to 4.13 percent from 4.12 percent, with points decreasing to 1.01rnfrom 1.26 (including the origination fee) for 80 percent LTV loans. Therneffective rate decreased from last week.</p

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“Applicationsrnincreased this week relative to the holiday week,” said MichaelrnFratantoni, MBA’s Vice President of Research and Economics. “Lookingrnover the past two weeks, purchase applications are flat, and refinancernapplications are down about five percent.”

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