Mortgage Apps: Still Much More Refi Demand Than 2 Weeks Ago

Mortgage application numbers during the week ended October 24 backed off a bit from the numbers posted during the week ended October 17 but were still elevated compared to other recent weeks.  The Mortgage Bankers Association's (MBA's) Weekly Mortgage Applications Survey for last week reported almost entirely declining numbers but for context we will include the increases from the previous week in which there was unusually high refinancing volume.

MBA's Market Composite Index, a measure of mortgage loan application volume fell 6.6 percent on a seasonally adjusted basis from the previous week when it had posted an 11.6 percent increase.   On an unadjusted basis the Index was down 7 percent following a 12 percent gain.

The Refinancing Index was down 7 percent as well on the heels of a huge 23 percent gain the previous week but refinancing retained the same 65 percent market share as the prior week.    

Refinance Index vs 30 Yr Fixed

There had been no increases during the week ended October 17 for any of the Purchase Index numbers, all declined and did so against this week.  The Purchase Index, both seasonally adjusted and unadjusted, declined 5 percent and the unadjusted index was 15 percent lower than during the same week in 2013.

Purchase Index vs 30 Yr Fixed

MBA said that the seasonally adjusted purchase index was the lowest since last February as was the conventional purchase index and the government purchase index was the lowest since August 2007.  MBA also reported the following regarding government-backed loans:   

• The FHA share of total applications increased from 8.3 percent last week to 8.9 percent this week.
• The VA share rose from 9.6 percent to 10.7 percent.
• The USDA portion moved from 0.8 percent of applications to 0.9 percent this week.

"Borrowers with jumbo loans tend to be most sensitive to changes in rates, and that sensitivity has been clearly apparent in the past few weeks with double and even triple digit percentage changes in refinance application volume for jumbo loans," said Mike Fratantoni, MBA's Chief Economist. "The average loan size for refinance applications decreased to $263,600 in the most recent week from a survey high of $306,400 the previous week. The decrease was driven by a 41 percent drop in refinance applications for loans greater than $729,000, which had surged almost 130 percent the week before."

The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming balances of $417,000 or less increased from 4.10 percent to 4.13 percent.  Points were unchanged at 0.21 and the effective rate increased.

The jumbo version of the FRM, with loan balances above $417,000, rose 10 basis points to 4.13 percent.   Points decreased to 0.13 from 0.20 and the effective rate rose.

The average interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.84 percent from 3.81 percent, with points increasing to 0.16 from 0.07.  The effective rate increased.

Fifteen-year FRM had an average contract rate of 3.28 percent, unchanged from the previous week.  Points increased to 0.24 from 0.22 and the effect rate remained the same. 

The market share of adjustable rate mortgages (ARMs) fell back to 8.2 percent of all applications during the week after establishing reaching 9.4 percent the week before - the highest share since June 2008.   The average contract interest rate for 5/1 ARMs was unchanged at 2.94 percent, Points moved to 0.43 from 0.37, raising the effective rate.

MBA's survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted since 1990. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100 and interest rate information assumes a loan with an 80 percent loan-to-value ratio with points that include the origination fee.