Loan Demand: Refi Index Near 2011 Highs

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey* for the week ending July 22, 2011. 

Last week the MBA reported a 23.1 percent increase in the number of refinance applications taken during the week of June 15th. This was the largest jump since January 2010 (the fastest week over week change in 2011 was seen in February at just under 18%). Purchase demand on the other hand declined slightly. 

This week the MBA reports a modest decline in both refinance and purchase applications.

Excerpts from the Release...

The Market Composite Index, a measure of mortgage loan application volume, decreased 5.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 4.9 percent compared with the previous week.  The four week moving average is down 0.3 percent.

The Refinance Index decreased 5.5 percent from the previous week.  The four week moving average is down 0.3 percent.

The seasonally adjusted Purchase Index decreased 3.8 percent from one week earlier. The unadjusted Purchase Index decreased 3.4 percent compared with the previous week and was 2.2 percent higher than the same week one year ago.  The four week moving average is down 0.5 percent.

The average contract interest rate for 30-year fixed-rate mortgages increased to 4.57 percent from 4.54 percent, with points increasing to 1.14 from 0.98 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also increased from last week.  

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.67 percent from 3.66 percent, with points increasing to 1.08 from 0.97 (including the origination fee) for 80 percent LTV loans. The effective rate also increased from last week.

The refinance share of mortgage activity decreased to 69.6 percent of total applications from 70.1 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.1 percent from 5.8 percent of total applications from the previous week.

* ABOUT: The MBA's loan application survey covers over 50% of all U.S. residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts. The data gives economists a snapshot view of consumer demand for mortgage loans. In a falling mortgage rate environment, a trend of increasing refinance applications implies consumers are seeking out lower monthly payments. If consumers are able to reduce their monthly mortgage payment and increase disposable income through refinancing, it can be a positive for the economy as a whole (may boost consumer spending. It also allows debtors to pay down personal liabilities faster. A trend of declining purchase applications implies home buyer demand is shrinking.