Refinancing Applications Surge as MBA's Average Rates Hit New 2011 Lows

Buoyed by a surge in refinancing, the Market Composite Index issued weekly by the Mortgage Bankers Association (MBA) increased by 4.1 percent on a seasonally adjusted basis during the week ended December 9.  The increase on a non-adjusted basis was 4.2 percent.  The Refinancing Index portion of the Composite increased by 9.3 percent to reach the highest level in over a month.

The seasonally adjusted Purchase Index was down 8.2 percent from the week ended December 2, and the unadjusted  Purchase Index dropped down 11.8 percent week-over-week and was 4.3 percent lower than during the same week in 2010.

The four week moving average for all three indices rose during the week; the seasonally adjusted Market Index 0.65 percent, the seasonally adjusted Purchase Index 1.55 percent, and the Refinance Index 0.69 percent.

The refinance share of mortgage activity increased to 79.7 percent of total applications from 76.0 percent the previous week; the highest refinance share this year. The adjustable-rate mortgage (ARM) share of activity decreased to 5.6 percent from 5.7 percent of total applications from the previous week.

Looking back at the monthly totals for November, MBA found that purchase applications were down compared to October in all loan categories except for the largest loan amounts, those over $729,000 which increased 1.9 percent.  The change in application volume year-over-year was mixed. 

Interest rates decreased across all loan products with most establishing new 2011 lows.  The 30-year fixed rate mortgage (FRM) with a conforming balance (under $417,500) had an average contract interest rate of 4.12 percent, down from 4.18 percent the previous week with points decreasing to 0.45 from 0.48.  Loan with a non-conforming or jumbo balance, i.e. over $417,500, decreased from 4.52 percent with 0.47 point to 4.47 percent with 0.45 point, the lowest rate so far this year.  The effective rate for both conforming and jumbo loans also decreased.

A 30-year FRM backed by FHA had a rate of 3.94 percent with 0.68 point compared to 3.98 percent with 0.52 point.  This latest rate is the lowest for FHA loans this year.  The effective rate increased.

A new low was reached by the 15-year FRM as well with the average decreasing to 3.44 percent with 0.52 point from 3.53 percent with 0.45 point. The effective rate also decreased from last week.

The average rate for  5/2 ARMs fell to 2.93 percent, the lowest rate of the year, from 3.01 percent.  Points also decreased to 0.53 from 0.54 and the effective rate decreased

All interest rates quoted are for loans with a 80 percent loan to value ratio and all points include the origination fee.  The MBA weekly survey covers 75 percent of all retail residential mortgage applications.  Respondents include mortgage bankers, commercial banks, and thrifts.