Lackluster Purchase Activity Boosts Refi Share

What little life there was inrnmortgage volume last week came from refinancing.  That wasn’t saying much.  The Mortgage Bankers Association’s (MBA’s) MarketrnComposite Index, a measure of application volume, increased 3.6 percent on arnseasonally adjusted basis during the week ended August 14 and 3 percent on anrnunadjusted basis.  The composite, after arncouple of sharp and short-lived spikes earlier this year, essentially remainsrnwhere it has been since early 2014. </p

The Refinance Index rose 7 percent fromrnthe previous week, returning to May levels. rnFifty-five percent of applications were for refinancing, the largestrnshare since April although overall volume was significantly higher at thatrntime.  The share during the week endedrnAugust 7 was 53.1 percent. </p

The increase in refinance applications wasrnoffset by fewer purchase applications, setting the seasonally adjusted PurchasernIndex back by 1 percent to its lowest level since March. The unadjustedrnPurchase Index decreased 3 percent compared with the previous week and was 19rnpercent higher than the same week one yearrnago.</p

Refinance Index vs 30 Yr Fixed</p

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Purchase Index vs 30 Yr Fixed</p

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“Concerns about the Chinese economy pushedrninterest rates down last week, resulting in a two basis point decline in thirtyrnyear fixed interest rate, bringing the rate downrnto its lowest since May 2015,” said Lynn Fisher, MBA’s Vice President ofrnResearch and Economics. “The pick-up in refinance activity was led by largerrnloan sizes on average, as continued investor interest drove jumbo interestrnrates down even further, by five basis points.”</p

Applications for FHA loans had a 12.9rnpercent share compared to 13.3 percent the previous week and the VA share dippedrnto 11.1 percent from 11.3 percent.  ThernUSDA share of total applications increased to 0.8 percent from 0.7 percent. </p

Both averagerncontract and effective interest rates decreased during the week, with most reachingrnthree-month lows.  The averagerncontract interest rate for 30-year fixed-rate mortgages (FRM) with conformingrnloan balances ($417,000 or less) decreased to 4.11 percent, the lowest raternsince May, from 4.13 percent, with points increasing to 0.37 from 0.31.</p

Jumbo 30-year FRM (loan balances greaterrnthan $417,000) were also at the lowest levels since May.  The average contract interest rate was 4.03rnpercent, 5 basis points below the rate the previous week.  Points decreased to 0.29 from 0.34. </p

The average rate for 30-year FHA-backedrnFRM decreased to 3.88 percent, the lowest level since May 2015, from 3.94rnpercent.  Points decreased to 0.17 fromrn0.22. </p

The contract rate for 15-year FRM edgedrndown 2 basis points to 3.37 percent. rnPoints decreased to 0.36 from 0.38. </p

The adjustable-rate mortgage (ARM) sharernof activity increased to 6.9 percent of applications after holding two weeks atrn6.8 percent. Rates for 5/1 ARMs averaged 2.98 percent, the lowest since May,rndropping from 3.11 percent a week earlier. rnPoints increased from 0.32 to 0.40. </p

The Weekly Mortgage Application Survey, whichrnMBA has conducted since 1990, covers over 75 percent of all U.S. retailrnresidential mortgage applications. rnRespondents include mortgage bankers, commercial banks and thrifts. Basernperiod and value for all indexes is March 16,rn1990=100 and interest rate data is based on loans with an 80 percentrnloan-to-value ratio.  Points include thernorigination fee.

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