Loan Applications Lower as Mortgage Rates Spike

The MortgagernBankers Association (MBA) today released its Weekly Mortgage ApplicationsrnSurvey* for the week ending July 1, 2011.</p

The gist of today’s release is that any mini-refi-boom that may have precipated by recently lower rates is–SURPRISE!–sensitive to rising rates!  The average contract interest rate for 30-year fixed-rate mortgages increased to 4.69 percent from 4.46 percent in the previous week. Refinance demand fell as a result.  In the 3rd chart below, that relationship played out clearly last week.  Expect any continued increases in rates to bring the Refinance Index back under 2500. </p

ANOTHER CHART: THE MORTGAGE RATES SPIKE</p

Excerptsrnfrom the Release…</p

The MarketrnComposite Index, a measure of mortgage loan application volume, decreased 5.2rnpercent on a seasonally adjusted basis from one week earlier.  On anrnunadjusted basis, the Index decreased 5.1 percent compared with the previousrnweek.  The four week moving average is down 0.5 percent.</p

ThernRefinance Index decreased 9.2 percent from the previous week. The four weekrnmoving average is down 1.1 percent. The refinance share of mortgage activity decreasedrnto 66.4 percent of total applications from 69.5 percent the previous week.  The Refinance Index has decreased for 3rnconsecutive weeks, reaching its lowest level since May 6, 2011.</p

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Thernseasonally adjusted Purchase Index increased 4.8 percent from one week earlier.rnThe unadjusted Purchase Index increased 4.4 percent compared with the previousrnweek and was 11.7 percent higher than the same week one year ago. The four weekrnmoving average is up 0.8 percent.</p

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The average contract interest rate for 30-year fixed-rate mortgages increased to 4.69 percent from 4.46 percent, with points decreasing to 0.90 from 1.19 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This is the highest 30-year rate recorded in the survey since the middle of May 2011. The effective rate also increased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.79 percent from 3.64 percent, with points decreasing to 0.88 from 1.11 (including the origination fee) for 80 percent LTV loans. This is the highest 15-year rate recorded in the survey since the beginning of May 2011. The effective rate also increased from last week.The adjustable-rate mortgage (ARM) share of activity decreased to 5.8 percent from 5.9 percent of total applications from the previous week.

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

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READ MORE: New FHA MIP Structure to Slow Streamlines</p

READ MORE: Rents Seen Rising as Poor Credit HurtsrnHomeownership Demand</p

READ MORE: Realtors Request Looser Credit Regs as HomernSales Decline</p

* ABOUT:rnThe 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 and increaserndisposable income through refinancing, it can be a positive for the economy asrna whole (may boost consumer spending. It also allows debtors to pay downrnpersonal liabilities faster. A trend of declining purchase applications impliesrnhome buyer demand is shrinking.

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