Refinance Demand Hits 8-Month Low as Mortgage Rates Rise

The Mortgage Bankers Association (MBA) today released its Weekly Application Survey for the week ending December 17, 2010rn.  </p

The Mortgage Bankers Association 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 lookrn into consumer demand for mortgage loans. In a low mortgage rate environment, a trend of increasing refinance applications implies consumers are seeking out a lower monthly payment which can increase disposable income and consumer spending (or give consumers a chance to pay down other debts like credit cards). A falling trend of purchase applications indicates a decline in home buying interest, a negative forrn the housing industry and the economy as a whole.</p

Excerpts From The Release…</p

The Market Composite Index, arn measure of mortgage loan application volume, decreased 18.6 percent on arn seasonally adjusted basis from one week earlier.  On an unadjustedrn basis, the Index decreased 20.0 percent compared with thern previous week.  The four week moving average for the seasonally adjusted Market Index is down 9.8 percent.  </p

The Refinance Index decreased 24.6 percent from the previous week. The Refinance Index has declined six straight weeks andrn is at its lowest level since the week ending April 30, 2010.  The four week moving average isrn down 1.2 percent. The refinance share of mortgage activity decreased to 72.3 percent of total applications from 76.7 percent the previous week.rn This is the lowest refinance share observed in the survey since early June 2010.</p

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The seasonally adjusted Purchase Index decreased 2.5 percentrn from one week earlier. The unadjusted Purchase Index decreased 4.9 percent compared with the previous week and was 8.4 percentrn lower than the same week one year ago.   The four week moving average isrn down 1.2 percent</p

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The average contract interestrn rate for 30-year fixed-rate mortgages increased to 4.85 percent from 4.84 percent, with pointsrn decreasing to 0.96 from 1.33 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.  The effectivern rate decreased from last week.rn
   
The average contract interestrn rate for 15-year fixed-rate mortgages increased to 4.22 percent from 4.21 percent, with pointsrn decreasing to 1.19 from 1.28 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from lastrn week.rn

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“Refinance application volumern dropped sharply this week as mortgage rates held near six month highs,”rn said Michael Fratantoni,rn MBA’s Vice President of Research and Economics.  “Purchase applications fell for a second week, with the level of applicationsrn little changed over the past month, indicating that home sales are likely to remain relatively weak over the next few months.”rn

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