Pool of Eligible Refinance Candidates Dried Up at Current Rates

The Mortgage Bankers Association (MBA) todayrnreleased its Weekly Mortgage Applications Survey for the weekrnending March 25, 2011. </p

The MBA’s loan application survey covers overrn50% of all U.S. residential mortgage loan applications taken by mortgagernbankers, commercial banks, and thrifts. The data gives economists a snapshotrnview of consumer demand for mortgage loans. In a falling mortgage raternenvironment, a trend of increasing refinance applications implies consumers arernseeking out lower monthly payments. If consumers are able to reduce theirrnmonthly mortgage payment and increase disposable income through refinancing, itrncan be a positive for the economy as a whole (may boost consumer spending. Alsornallows debtors to pay down personal liabilities faster). A trend of decliningrnpurchase applications implies home buyer demand is shrinking.</p

Excerpts from the Release…</p

The Market Composite Index, a measure ofrnmortgage loan application volume, Mortgage applications decreased 7.5 percentrnon a seasonally adjusted basis from one week earlier.  On an unadjustedrnbasis, the Index decreased 7.2 percent compared with the previous week.  rn</p

The Refinance Index decreased 10.1 percentrnfrom the previous week.  The four weekrnmoving average is up 2.0 percent.  The refinance share of mortgagernactivity decreased to 64.3 percent of total applications from 66.4 percent thernprevious week. This is the second lowest refinance share reported since Mayrn2010. </p

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The seasonally adjusted Purchase Indexrndecreased 1.7 percent from one week earlier. The unadjusted Purchase Indexrndecreased 1.5 percent compared with the previous week and was 21.9 percentrnlower than the same week one year ago.  Thernfour week moving average is up 2.1 percent. rn</p

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The average contract interest raternfor 30-year fixed-rate mortgages increased to 4.92 percent from 4.80 percent,rnwith points decreasing to 0.83 from 0.96 (including the origination fee) for 80rnpercent loan-to-value (LTV) ratio loans.  The effective rate alsornincreased from last week. </p

The average contract interest raternfor 15-year fixed-rate mortgages increased to 4.16 percent from 4.02 percent,rnwith points increasing to 0.99 from 0.90 (including the origination fee) for 80rnpercent LTV loans. The effective rate also increased from last week.</p

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“Treasury and mortgage rates increased towards the end of last week, as global markets calmed following the recent crises in Japan and the Middle East,” said Michael Fratantoni from MBA. “Refinance volume predictably fell in response to these rate increases. As rates climb back to 5%, fewer homeowners have both the incentive and the ability to refinance.”</p

MND’s Adam Quinones had this to say last week…</p

“Recently lower mortgage rates have done little to motivate potential refinance candidates.” said MND’s Managing Editor Adam Quinones. “This isn’t a big surprise as most qualified borrowers  simply don’t have an incentive to refinance because they already did last year when rates were near record lows.  Other than that, qualification issues continue to prevent many folks from lowering their monthly payment. We do however expect a modest increase in purchase activity heading into the spring buying season.” </p

Today he adds, “It certaintly seems like the folks who missed out on a refinance in November are the only borrowers remaining who are eligible for a rate reduction.  Unfortunately we’ll need to see 30-year mortgage rates in the 4.25% area before a significant uptick in refinance activity is observed. Otherwise originators should be building their purchase business.”

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