Despite HARP, Purchase Increases, Application Volume Falls
Mortgage applications during the week ended March 9 declined 2.4 percent on a seasonally adjusted basis and 1.8 percent unadjusted from the previous week according to information released this morning by the Mortgage Bankers Association (MBA). The drop in the Market Composite Index, a measure of loan application volume, was driven by the fourth consecutive decline in the Refinance Index component which was down 4.1 percent from the week ended March 2. The seasonally adjusted Purchase Index increased 4.4 percent from the previous week to the highest level since January 13. On an unadjusted basis the Purchase Index was 6.0 percent higher than the previous week and 0.4 percent below its level one year earlier.
The four week moving average for the seasonally adjusted Market Index was down 2.12 percent and the Refinance Index declined 3.29 percent. The moving average for the seasonally adjusted Purchase Index rose 2.92 percent.
The share of refinancing continued to fall off of historic highs early in the year and represented 75.1 percent of total applications during the week compared to 77.0 percent the week before. This was the fourth consecutive decline in the market share of refinancing and the lowest share since November 25, 2011.
Michael Fratantoni, MBA's Vice President of Research and Economics pointed out that applications for home purchases increased again last week, coinciding with another strong job market report. "Purchase applications are now almost 12 percent above the level one month ago, even after adjusting for typical seasonal patterns," he said. "However, this level of purchase activity, adjusted or unadjusted, was essentially unchanged when compared to the same time last year. Purchase activity remains subdued and within the narrow range we have seen since the expiration of the homebuyer tax credit in 2010. Refinance application volume fell last week. Although rates were unchanged on average, they trended up through the course of the week, and this likely discouraged many potential refinance applicants."
Fratantoni said that the volume of refinancing activity coming through the HARP program continued to increase last week and has provided 30 percent of the volume over the last two weeks. "Typical HARP loans had loan-to-value ratios above 90 percent, indicating that lenders are reaching out to underwater borrowers."
Purchase Index vs 30 Yr Fixed
Refinance Index vs 30 Yr Fixed
The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($417,500 or less) was unchanged at 4.06 percent, with points decreasing to 0.43 from 0.50. The effective rate decreased from last week. Rates for 30-year jumbo (balances above $417,500) FRM increased from 4.33 percent with 0.40 point to 4.39 with 0.39 point and the effective rate increased.
The interest rate for FHA-backed 30-year FRM decreased to 3.82 percent from 3.87 percent, with points decreasing to 0.55 from 0.70, the lowest rate for these loans thus far in 2011. The effective rate decreased from last week.
The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 3.36 percent, with points decreasing to 0.34 from 0.38. The effective rate decreased from last week.
Rates for 5/1 adjustable rate mortgages (ARMs) increased to 2.81 percent with 0.37 point from 2.78 point with 0.35 point and the effective rate also increased. The share of ARMs increased 4 basis points to 5.8 percent of all mortgage applications for the week.
All interest rates are for loans with 80 percent loan-to-value ratios and points include the origination fee.
Final reports for the month of February show that purchase application volume increased by 18.0 percent during the month compared to January and was down 2.0 percent from January 2011. The increase was national in scope with only three states, Montana, The District of Columbia, and New Mexico seeing a monthly decrease in purchase activity
The survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100.