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Rates Continue to Stoke Refinancing Surge

by devteam January 21st, 2015 | Share

Applications for mortgage refinancing scored a second straight week ofrnsolid growth during the period ended January 16, with the Mortgage BankersrnAssociations (MBA) Refinance Index increasing 22 percent week-over-week.  That’s an impressive level of growth in light of the fact that last week’s refi activity already posted a 66 percent improvement.  The share of mortgage applicationsrnthat were for refinancing increased from 71 percent to 74 percent, the highestrnshare for refinancing since May 2013.  </p

The overall MBA Market Composite Index rose 14.2 percent on a seasonallyrnadjusted basis and was up 17 percent on an unadjusted basis.   Here too, anyrnadditional gains in the Composites were in themselves notable, building as theyrnwere building atop the previous week in which the adjusted and non-adjustedrnindexes had roared back from the holiday period with increases of 49.1 percentrnand 119 percent respectively.  </p

Refinance Index vs 30 Yr Fixed</p

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Applications for purchase mortgages were much more subdued.  The seasonally adjusted Purchase Index wasrndown 3 percent from the week ended January 9. rnThe unadjusted Purchase Index rose 3 percent week-over-week and was 3rnpercent higher than the index during the same week in 2013.</p

Purchase Index vs 30 Yr Fixed</p

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Mike Fratantoni, MBA’s Chief Economist said, “Mortgage application volume increased last week to its highestrnlevel since June 2013, led by a 22 percent increasernin refinance application volume. This increasernwas largely due to mortgagernrates droppingrnto their lowest level since May 2013. However, the recent reduction in FHArnmortgage insurance premiums also played a role: FHA refinancernapplications increased 57 percent last week. Even with this increase, refinances made up only 48 percentrnof FHA volume, compared to 73 percentrnfor VA, and 77 percent forrnconventional loans,” </p

Fratantoni continued, “Conventional purchasernapplications were down about 3 percent for the week on a seasonally adjusted basis,rnbut up 5 percent relative to last year at this time. FHA purchase applicationsrnwere down 1 percent for the week on a seasonally adjusted basis.”  </p

Conventional refinance applicationsrnincreased 21 percent relative to the previous week, while government refinances increased 29 percent. That gain was driven by the 57 percent surge in applications for FHA loans noted by Fratantoni which also boostedrnthe FHA share of refinancernapplications to 5.2 percentrnfrom 4.1 percent the prior week.</p

The FHA share of total applicationsrnincreased to 8.0 percent this week from 7.5 percent last week while the VArnshare slipped 3 basis points to a 9.4 percent share.  The USDA share of total applications decreased to 0.6rnpercent from 0.8 percent last week.</p

Mortgagerninterest rates continued to fall with all contract rates for fixed raternproducts back to May 2013 levels and effective rates down from the previousrnweek.  The average contract interest raternfor 30-year fixed-rate mortgages (FRM) with conventional balances of $417,000rnor less was 3.80 percent with 0.29 point compared to 3.89 percent with 0.23rnpoint a week earlier.  The jumbo 30.yearrnFRM (balances above $417,000) had a rate of 3.86 percent, down 2 basis pointsrnwith points unchanged at 0.23.</p

The average contract interest rate forrn30-year fixed-rate mortgages backed by the FHA decreased to 3.66 percent from 3.71 percent. rnPoints increased to 0.15 from -0.05.</p

Fifteen-year FRM contract rates backedrndown to 3.10 percent from 3.16 percent. rnPoints dipped to 0.29 from 0.30. </p

The average contractrninterest rate for 5/1 adjustable rate mortgages (ARMs) decreasedrnto 2.87 percent, the lowest level since June 2013, from 2.94 percent,rnwith points decreasing to 0.41 from 0.46 The ARMrnshare of activity increased to 6.4 percent of total applications from 5.9 percent the weekrnbefore..</p

MBA’s data is gathered from its WeeklyrnMortgage Application Survey which covers over 75 percent of all U.S. retail residential mortgage applications.  The survey has been conducted since 1990rnamong mortgage bankers, commercial banks and thrifts. Basernperiod and value for all indexes is March 16,rn1990=100 and interest rates information is quoted for loans with an 80rnpercent loan-to-value ratio.  Pointsrninclude the origination fee.

All Content Copyright © 2003 – 2009 Brown House Media, Inc. All Rights Reserved.nReproduction in any form without permission of MortgageNewsDaily.com is prohibited.

About the Author

devteam

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

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