Mortgage Apps Higher After Holiday. Refinances Drive Demand

The Mortgage Banker's Association today released the Weekly Survey on Mortgage Application Activity for the week ending December 4, 2009.

The Mortgage Banker's 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 look into consumer demand for mortgage loans. A rising trend of mortgage applications indicates home buying interest is increasing, a positive for the housing industry and economy as a whole. Furthermore, in a low mortgage rate environment, a trend of increased refinance applications implies consumers are seeking out a lower monthly payments which can result in increased disposable income and therefore more money to spend on discretionary items...or just an opportunity to pay down other debts like credit cards and car loans.

In last week's release, which reported on the holiday shortened week ending November 27, new loan application activity increased 2.1%. The refinance index was 1.7% higher and the Purchase index was up 4.1%. On an unadjusted basis, the Market Composite Index was 29.3% lower. The refinance share of mortgage activity increased to 72.1 percent of total applications from 71.7 percent the previous week. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.79 percent from 4.82 percent, with points decreasing to 1.00 from 1.19 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

This week's report indicated an increase in demand for new mortgage loans. The Market Composite Index rose 8.5%, the purchase index was 4.0% higher, and the refinance index jumped 11.1%. Refinances accounted for 74.4% of loan application activity this week, up from 72.1% in previous release.  It appears that the general focus on the Thanksgiving holiday prevented borrowers from submitting new loan applications in the previous week, however, because mortgage rates had testing record lows, borrower interest was high and demand carried over into this week's data.

From the Mortgage Banker's Association....

The Market Composite Index, a measure of mortgage loan application volume, increased 8.5 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 54.0 percent compared with the previous week, which was a shortened week due to the Thanksgiving holiday.The four week moving average for the seasonally adjusted Market Index is up 1.5 percent.

The Refinance Index increased 11.1 percent from the previous week. The four week moving average is up 1.6 percent for the seasonally adjusted Refinance Index.The refinance share of mortgage activity increased to 74.4 percent of total applications from 72.1 percent the previous week.

The seasonally adjusted Purchase Index increased 4.0 percent from one week earlier.  The unadjusted Purchase Index increased 41.7 percent compared with the previous week and was 18.8 percent lower than the same week one year ago.  The increase in purchase applications reflected a 10.0 percent increase in Government Purchase applications and a 0.2 percent decrease in Conventional Purchase applications, both on a seasonally adjusted basis. The four week moving average is up 2.3 percent for the seasonally adjusted Purchase Index

The average contract interest rate for 30-year fixed-rate mortgages increased to 4.88 percent from 4.79 percent, with points increasing to 1.17 from 1.00 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This ends a six week run of declining 30-year fixed rates which may have triggered the increase in refinance applications.

The average contract interest rate for 15-year fixed-rate mortgages increased to 4.33 percent from 4.27 percent, with points decreasing to 1.02 from 1.33 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for one-year ARMs decreased to 6.55 percent from 6.56 percent, with points increasing to 0.38 from 0.34 (including the origination fee) for 80 percent LTV loans.