Token Bounce Stops Bleeding in Refinance Applications

Applications for mortgages increased during the week ended December 16, managing to narrowly cling to a gain in activity compared to a year earlier. The Mortgage Bankers Association said its Market Composite Index, a measure of application volume, increased 2.5 percent compared to the week ended December 9 on a seasonally adjusted basis.  The index was up 2.0 percent unadjusted.  

Refinances constituted a 57.9 percent share of total activity.  The previous week refinancing had a 57.2 percent share.The Refinancing Index itself gained 3 percent compared to the previous week, but considering the past 2 months have seen a decline of more than 30%, this week's bounce doesn't affect the bigger picture.  The damage is already done.

The seasonally adjusted Purchase Index was also 3 percent higher than the prior week although it dipped by 0.1 percent on an unadjusted basis. The year-over-year increase was 1.0 percent.  With the exception of two holiday-shortened weeks, the Purchase Index has increased on an annual basis all year.  This was the smallest such increase since last October. The average loan size for purchase applications reached its second-highest survey level at $312,000.

The FHA share of total applications decreased from 11.6 percent to 11.5 percent and the VA gain 0.1 percent to 12.0 percent.  The USDA share of total applications decreased to 0.8 percent from 0.9 percent the previous week.

Both the contract and the effective interest rates increased for all loan products, with most setting new two- plus year highs.  The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($417,000 or less) increased to its highest level since May 2014, 4.41 percent, from 4.28 percent, Points increased to 0.38 from 0.36.

The contract rate for 30-year FRM with jumbo loan balances (greater than $417,000) increased to its highest level since April 2014, 4.36 percent, from 4.29 percent.  Points increased to 0.26 from 0.24.

FRM backed by the FHA were also at the highest level since April 2014, 4.15 percent, up from 4.02 a week before.  Points dipped to 0.29 from 0.33.

The rate for 15-year FRM jumped 10 basis points to 3.64 percent, becoming the highest contract rate since January 2014.  Points eased back to 0.34 from 0.38.

The average rate for 5/1 adjustable rate mortgages (ARMs) rose to its highest level since September 2013, 3.45 percent, from 3.28 percent.  Points went from 0.28 to 0.26.  The ARM share of activity increased to 6.5 percent from 6.2 percent.  That share has now risen for each of the last nine weeks, reaching its highest level since last February.

MBA will not be releasing mortgage application volume data next week. Its offices will be closed starting December 23, reopening on Tuesday, January 3, 2017.  Results for the weeks ending December 23 and December 30 will be released on Wednesday, January 4, 2017.  

MBA's Weekly Mortgage Applications Survey has been conducted since 1990.  It covers over 75 percent of the nation's retail mortgage applications and survey respondents include mortgage bankers, commercial banks and thrifts.  Base period and value for all indexes is March 16, 1990=100.  Interest rate data is based on mortgages with an 80 percent loan-to-value ratio and points that include the origination fee.