Loan Demand Up as Mortgage Rates Fall

The Mortgage Bankers Association (MBA) today released its Weekly MortgagernApplications Survey* for the week ending July 29, 2011.  </p

Excerpts from the Release…</p

The Market Composite Index, a measure of mortgage loan application volume,rnincreased 7.1 percent on a seasonally adjusted basis from one week earlier. Onrnan unadjusted basis, the Index increased 7.0 percent compared with the previousrnweek.  The four week moving average is up 2.8 percent.</p

The Refinance Index increased 7.8 percent from the previous week.  Thernfour week moving average is up 4.2 percent.</p

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The seasonally adjusted Purchase Index increased 5.1 percent from one weekrnearlier. The unadjusted Purchase Index increased 5.2 percent compared with thernprevious week and was 5.9 percent higher than the same week one year ago. rnThe four week moving average is down 0.4 percent.</p

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The average contract interest rate for 30-year fixed-rate mortgagesrndecreased to 4.45 percent from 4.57 percent, with points decreasing to 0.78rnfrom 1.14 (including the origination fee) for 80 percent loan-to-value (LTV)rnratio loans. The effective rate also decreased from last week. Both therncontract rate and effective rate for 30-year fixed rate mortgages are at theirrnlowest levels since November 5, 2010.</p

The average contract interest rate for 15-year fixed-rate mortgagesrndecreased to 3.52 percent from 3.67 percent, with points decreasing to 1.02rnfrom 1.08 (including the origination fee) for 80 percent LTV loans. Therneffective rate also decreased from last week. Both the contract rate and therneffective rate for 15-year fixed rate mortgages are the lowest since the surveyrnbegan in 1990.<br /<br /The refinance share of mortgage activity increased to 70.1 percent of totalrnapplications from 69.6 percent the previous week. The adjustable-rate mortgagern(ARM) share of activity increased to 6.6 percent from 6.1 percent of totalrnapplications from the previous week.</p

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“Treasury rates plummeted more than 20 basis points last week as allrneyes were focused on the debt ceiling negotiations in Washington, and economicrndata depicted much slower than anticipated economic growth,” said MichaelrnFratantoni, MBA’s Vice President of Research and Economics. “Mortgagernrates fell, with the rate on 15-year mortgages reaching a new low in ourrnsurvey. Refinance application volume increased, but even though 30-yearrnmortgage rates are back below 4.5 percent, the refinance index is still almostrn30 percent below last year’s level. Factors such as negative equity and a weakrnjob market continue to constrain borrowers. Purchase activity increased off ofrna low base, returning to levels of one month ago, but remains weak byrnhistorical standards.”</p

CHART OF MOST CURRENT MORTGAGE RATE QUOTES</p

* ABOUT: The MBA’s loan application survey covers over 50% of allrnU.S. residential mortgage loan applications taken by mortgage bankers,rncommercial banks, and thrifts. The data gives economists a snapshot view ofrnconsumer demand for mortgage loans. In a falling mortgage rate environment, arntrend of increasing refinance applications implies consumers are seeking outrnlower monthly payments. If consumers are able to reduce their monthly mortgagernpayment and increase disposable income through refinancing, it can be a positivernfor the economy as a whole (may boost consumer spending. It also allows debtorsrnto pay down personal liabilities faster. A trend of declining purchasernapplications implies home buyer demand is shrinking.

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