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Refinancing Plummets as Rates Rise; Purchases Fail to Pick up Slack
The rally inrnrefinancing reported last week by the Mortgage Bankers Association (MBA) wasrnshort lived. Rates rose again during thernweek ended September 6, sending refinancing applications into a tailspin. MBA’s Refinancing Index, a measure ofrnrefinancing volume dropped 20 percent and has now fallen 71 percent from itsrnrecent peak during the week of May 3. Thernlast time the Refinancing Index was lower was in June 2009. </p
Refinance Index vs 30 Yr Fixed</p
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Refinancing represented 57 percent of mortgagernapplications compared to 61 percent the previous week and was its smallestrnshare since April 2010. The HomernAffordable Refinance Program held on to the previous week’s share ofrnrefinancing applications, 38 percent. MBA’s MarketrnComposite Index, a measure of all application volume, was down 13.5 percent onrna seasonally adjusted basis from the week ended August 30 and 23 percent on anrnunadjusted basis. </p
The Purchasing Indexrnwas also off, decreasing 3 percent on a seasonally adjusted basis from thernprevious week. The unadjusted index wasrndown 14 percent week-over-week but was 7 percent higher than during the samernweek in 2012. Thernweek’s results included an adjustment for the Labor Day holiday.
</p
Purchase Index vs 30 Yr Fixed</b</p
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</p<pThe MBA survey shows that both contract andrneffective interest rates increased across the board. The average contract interest rate forrn30-year fixed-rate mortgages (FRM) with conforming loan balances ($417,000 orrnless) increased to 4.80 percent from 4.73 percent and points increased to 0.46 from 0.33. The jumbo 30-year FRM (with balances overrn$417,000 had an average rate of 4.84 percent with 0.41 point compared to 4.71rnpercent with 0.25 point the previous week. rn<br /<br /The rate for 30-year FRM by the FHA increasedrn8 basis points to 4.56 percent with points increasing to 0.28 from 0.03 and the rate of 15-</p
The average contractrninterest rate for 15-year FRM was 3.83 percent with 0.42 point. The previous week the average was 3.75rnpercent with 0.30 point. rn</p
The adjustable-rate mortgagern(ARM) share of activity was unchanged at 7 percent of total applications.rnThe average contract interest rate for 5/1 ARMs increased to 3.59 percent from 3.49 percent withrnpoints increasing to 0.43 from 0.37</p
Rates quoted are for loansrnwith an 80 percent loan-to-value ratio. rnPoints include the origination fee.</p
MBA’s survey covers over 75rnpercent of all U.S. retail residential mortgage applications, and has beenrnconducted weekly since 1990. Respondents include mortgage bankers, commercialrnbanks and thrifts. Base period and value for all indexes is March 16, 1990=100.
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About the Author
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Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.
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