Mortgage Applications Drop in Holiday Shortened Week

The Mortgage Bankers AssociationrnWeekly Mortgage Applications Survey for the week ended November 12 reports arndrop of 14.4 percent in its Market Composite Index, a measure of loan applicationrnvolume, from the week ended November 5. rnThis figure is seasonally adjusted but does not include an adjustmentrnfor the Veterans Day Holiday.  On anrnunadjusted basis, the Index was down 15.0 percent from the previous week.</p

The Refinance Indexrndecreased 16.5 percent from the previous week and is at the lowest level observedrnsince July of this year; however, this figure is apparently similarlyrnunadjusted. Soon after the MBA report was released, Merrill Lynch/Bank ofrnAmerica released an Agency MBS Research Alert pointing out this omission. Accordingrnto the Alert, the seasonally adjusted refinance index dropped from 4587 to 3831rnwhile the non-seasonally adjusted indices dropped by exactly the samernamount.  “An identical move in bothrnseasonally adjusted and non-seasonally adjusted indices implies that thernrefinance index was not adjusted for Veterans Day Holiday.”</p

The memo concludes that,rnwith a 25%rnadjustment to account for Veterans Day holiday, the refinance index wasrnmarginally higher (4788) even though the mortgage rate was 18 bps higher basedrnon the MBA survey.”  It goes on tornsay that, as the holiday is not widely observed, the adjustment should probablyrnnot be a full 25 percent, but the adjustment does flatten out the drop.  </p

The unadjusted PurchasernIndex decreased 8.2 percent compared with the previous week and was 11.3rnpercent lower than the same week one year ago. The seasonally adjusted PurchasernIndex decreased 5.0 percent from one week earlier, the first decrease afterrnthree consecutive weekly increases. </p

The four week movingrnaverage for the seasonally adjusted Market Index is down 2.8 percent.  Thernfour week moving average is up 1.3 percent for the seasonally adjusted PurchasernIndex and down 3.7 percent for the Refinance Index. </p

Refinancing held an 80.3rnpercent share of total mortgage activity, down from 81.7 percent the previous weekrnwhile adjustable-rate mortgages accounted for 5.3 percent of applications,rnunchanged from the previous week. </p

The average contractrninterest rate for 30-year fixed-rate mortgages was up sharply to 4.46 percentrnwith 1.13 points (including the origination fee) from 4.28 percent and 1.04rnpoints. This is the highest 30-year fixed-rate since September 10, 2010. Therneffective rate also increased from last week. </p

The average rate forrn15-year fixed-rate mortgages increased to 3.87 percent from 3.64 percent, withrnpoints decreasing to 0.91 from 1.08. rnThis is the highest 15-year fixed-rate since the week ending Septemberrn17, 2010.The effective rate also increased from last week.  All interest rates are for 80 percent LTVrnloans.</p

“Rates increased sharplyrnlast week due to stronger economic data and lingering uncertainty regarding thernstructure and impact of the Fed’s QE2 program.  Mortgage applications,rnparticularly for refinances, dropped in response,” said Michael Fratantoni,rnMBA’s Vice President of Research and Economics.

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