Mortgage Applications Decline. Refinance Demand Drops 16.2%. Purchases Down 5.2%

by devteam October 28th, 2009 | Share

The Mortgage Bankers Association today released the Weekly Survey on Mortgage Application Activity for the week ending October 23, 2009.

Housing is a key component of economic forecasts, thus real estate surveys and housing data are closely scrutinized by policy makers.

The Mortgage Banker's application survey covers over 50% of all US residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts. The data gives economists a look into consumer demand for mortgage loans. A rising trend of mortgage applications indicates home buying interest is increasing, a positive for the housing industry and economy as a whole. Furthermore, in a low mortgage rate environment, a trend of increased refinance applications implies consumers are seeking out a lower monthly payments which can result in increased disposable income and therefore more money to spend on discretionary items…or just an opportunity to pay down other debts like credit cards and car loans.

In last week's release, which reported data for the week ending October 16, mortgage application activity fell 13.7% as mortgage rates rose from 5.02% to 5.07%. The Refinance Index, adjusted for the Columbus Day holiday, decreased 16.8% from the previous week while the seasonally adjusted Purchase Index moved lower as well, decreasing 7.6% from one week earlier. The refinance share of mortgage activity fell to 65.0% of total applications from 67.4% in the previous week.

In today's release, which covers new loan applications for  the week ending October 23,  the MBA reported that demand for new mortgages dropped 12.3%, even as mortgage rates fell from 5.04% to 5.07%.

From the Mortgage Banker's Association…

The Market Composite Index, a measure of mortgage loan application volume, decreased 12.3 percent on a seasonally adjusted basis from one week earlier.

The seasonally adjusted Purchase Index decreased 5.2 percent from one week earlier.

The Refinance Index decreased 16.2 percent from the previous week. The refinance share of mortgage activity decreased to 62.3 percent of total applications from 65.0 percent the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.04 percent from 5.07 percent, with points increasing to 1.25 from 1.13 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The average contract interest rate for 15-year fixed-rate mortgages increased to 4.53 percent from 4.51 percent, with points decreasing to 0.78 from 0.96 (including the origination fee) for 80 percent LTV loans.

The four week moving average for the seasonally adjusted Market Index is down 3.1 percent.  The four week moving average is down 1.4 percent for the seasonally adjusted Purchase Index, while this average is down 4.1 percent for the Refinance Index.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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