Drop in Refinancing Curtails Application Volume

The Mortgage Composite Index, a measure of loan application volume, was down 6.7 percent on a seasonally adjusted basis and 6.6 percent unadjusted during the week ended June 29 compared to the week ended June 22.  The Mortgage Bankers Association (MBA) released the Composite and other results of its weekly Mortgage Applications Survey this morning.

The decrease in mortgage volume was attributed to a drop of 8 percent in the Refinance Index which was in turn driven by a drop in applications for government-backed refinancing loans.  The share of refinancing applications was 78 percent of all applications, down one percentage point from the previous week.  Applications for HARP refinancing which is available only to current Freddie Mac and Fannie Mae borrowers have represented a quarter of all refinancing applications for the last two weeks.

The seasonally adjusted Purchase Index was up one percent from the previous week.  The unadjusted Purchase Index rose only slightly from the previous week and was down 7 percent from the same week in 2011.  

Purchase Index vs 30 Yr Fixed

Refinance Index vs 30 Yr Fixed

Both the contract interest rate and the effective rate for all loan types decreased during the week and several rates hit new all time lows.   The average contract rate for 30-year fixed rate mortgages (FRM) with conforming balances ($417,500 or less) decreased to 3.86 percent with 0.41 point from 3.88 percent with 0.40 percent, the lowest rate for those loans since MBA began tracking them. 

Jumbo 30-year FRM (balances over $417,500) dropped four basis points to 4.08 percent with points up to 0.38 from 0.35.  This was the second lowest jumbo loan rate in MBA's history.   

FHA-backed 30-year FRM also set a new benchmark low with an average rate of 3.69 percent with 0.46 point compared to 3.71 percent with 0.46 point.   

Fifteen-year FRMs set a new low at 3.20 percent with 0.47 point.  The rate the previous week was 3.24 percent with 0.44 point.

The average 5/1 adjustable rate mortgage (ARM) rate fell to 2.76 percent with 0.45 point, down from 2.81 percent with 0.41 point.  Applications for ARMs represented only 4 percent of all mortgage applications.

All rate quotes are for loans with an 80 percent loan-to-value ratio and points include the application fee.

The MBA's weekly 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.