Refi Demand Falls to 2-yr Lows, Dragging Down MBA Survey

Purchase applications shored up application volume during the week ended July 12 after four straight weeks of decline. Refinancing activity continued to react to increased rates and seasonally adjusted figures from the Mortgage Bankers Association's (MBA's) Weekly Mortgage Application Survey were muddied a bit by adjustments to the previous weeks figures because of the July 4 holiday.

MBA's Market Composite Index, a measure of that application volume, decreased 2.6 percent on a seasonally adjusted basis from the week ended July 5 however it increased 22 percent on an unadjusted basis, the first increase in five weeks.

The Refinance Index was down 4 percent from the previous week and is at its lowest level since July 2011. Refinancing dropped to a 63 percent share of all application activity, its lowest level since April 2011 from a 64 percent share the previous week. Thirty-four percent of refinancing applications were for the Home Affordable Refinance Program (HARP) compared to 35 percent the week before..

Refinance Index vs 30 Yr Fixed

The seasonally adjusted Purchase Index increased 1 percent from one week earlier but the unadjusted Index jumped 26 percent compared with the previous week and was 5 percent higher than the same week one year ago.

Purchase Index vs 30 Yr Fixed

Contract interest rates which had risen sharply for several weeks were mixed during the week while effective rates all declined. The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($417,500 or less) was unchanged at 4.68 percent,with points decreasing to 0.42 from 0.46. The interest rate for the jumbo 30-year FRM (loan balances over $417,500) decreased to 4.81 percent from 4.86 percent and points increased to 0.40 from 0.37. FHA-backed 30-year FRM had a contract rate of 4.38 percent with 0.22 point compared to 4.37 percent with 0.39 point the previous week.

The average contract interest rate for 15-year fixed-rate mortgages dropped 6 basis points to 3.70 percent. Points decreased to 0.38 from 0.41.

The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) slipped to 3.39 percent from 3.40 percent and points fell to 0.37 from 0.54, The ARM share of activity increased to 7 percent of total applications.

Rates quoted are for 80 percent loan-to-value ratio mortgages and points include the origination fee.

MBA's Weekly Mortgage Applications 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.