Refinance Demand Stale as Rates Rally

The Mortgage Bankers Association (MBA) today released its WeeklyrnMortgage Applications Survey for the week ending March 11, 2011. </p

The MBA’s loan application survey covers over 50% of all U.S. residentialrnmortgage loan applications taken by mortgage bankers, commercial banks, andrnthrifts. The data gives economists a snapshot view of consumer demand forrnmortgage loans. In a falling mortgage rate environment, a trend of increasingrnrefinance applications implies consumers are seeking out lower monthlyrnpayments. If consumers are able to reduce their monthly mortgage payment andrnincrease disposable income through refinancing, it can be a positive for therneconomy as a whole (may boost consumer spending. Also allows debtors to payrndown personal liabilities faster). A trend of declining purchase applicationsrnimplies home buyer demand is shrinking.</p

Excerpts from the Release…</p

The Market Composite Index, a measure of mortgage loan application volume,rndecreased 0.7 percent on a seasonally adjusted basis from one weekrnearlier.  On an unadjusted basis, the Index decreased 0.5 percent comparedrnwith the previous week.  </p

The Refinance Index increased 0.9 percent from the previous week and is thernhighest Refinance Index recorded in the survey since December 2010.  The fourrnweek moving average is up 6.6 percent. The refinance share of mortgage activityrnincreased to 66.4 percent of total applications from 65.5 percent the previousrnweek. </p

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The seasonally adjusted Purchase Index decreased 4.0 percent from one weekrnearlier. The unadjusted Purchase Index decreased 3.2 percent compared with thernprevious week and was 15.5 percent lower than the same week one year ago.  The four week moving average is up 1.6rnpercent.</p

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The average contract interest raternfor 30-year fixed-rate mortgages decreased to 4.79 percent from 4.93 percent,rnwith points increasing to 1.07 from 0.87 (including the origination fee) for 80rnpercent loan-to-value (LTV) ratio loans. This is the lowest contract 30-yearrnrate observed in the survey since the week ending January 14, 2011.  Therneffective rate also decreased from last week. </p

The average contract interest raternfor 15-year fixed-rate mortgages decreased to 4.03 percent from 4.17 percent,rnwith points decreasing to 0.85 from 1.15 (including the origination fee) for 80rnpercent LTV loans. This is the lowest contract 15-year interest rate observedrnin the survey since the week ending December 3, 2010.  The effective raternalso decreased from last week.</p

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Stored borrower demand was released late last week as mortgage rates rallied back to the lows of the year. Lock desk flows were busiest on Friday, March 11th. The thing is, there just wasn’t that much pent up energy to be released! Even after adjusting for the previous week’s distorted data, the uptick in activity was modest at most. The mortgage market feels very stale…..

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