After a strong showing in the first few weeks of the New Year, mortgage applications dropped sharply during the week ended January 25.  The Mortgage Bankers Association (MBA) reported that its Market Composite Index, a measure of application volume, decreased 8.1 percent on a seasonally adjusted basis from the previous week and was down 17 percent on an unadjusted basis.  The results included an adjustment to account for a week shortened by the Martin Luther King holiday.

The Refinance Index decreased 10 percent from the week ended January 18 and refinancing dropped from the 82 percent share of mortgage activity it had maintained for several weeks to a 79 percent share. The HARP share of refinance applications increased to 26 percent from 25 percent.

Applications for purchase mortgages were down 2 percent on a seasonally adjusted basis from the previous week and down 6 percent unadjusted.  The unadjusted purchase index was 2 percent higher than during the same week in 2011.

MBA's Mortgage Application Survey also gathers information on average contract interest and effective rates and those increased for all fixed-rate products.  The average contract rate for 30-year fixed-rate mortgages (FRM) with conforming balances of $417,500 or less increased 5 basis points to 3.67 percent, the highest rate since September 2012 and the sixth increase in seven weeks.  Points decreased from 0.43 to 0.42.  The contract rate for jumbo 30-year FRM, those with balances over $417,500, increased to 3.95 percent with 0.39 point from 3.85 percent with 0.34 point.  FHA-backed 30-year mortgages had an average contract rate of 3.48 percent with 0.33 point compared to 3.40 percent with 0.53 percent the previous week.

Fifteen-year FRM rates averaged 2.95 percent with 0.38 point.  A previous week the average rate was 2.87 percent with 0.39 point.

Four percent of mortgage applications were for adjustable rate products (ARMs) of various types, a slight increase from the previous week.  The contract rate for the most popular of these, the 5/1 hybrid mortgage, decreased to 2.60 percent with 0.33 point from 2.61 percent with 0.32 point.  

MBA's weekly mortgage application survey has been conducted since 1990.  Respondents include mortgage bankers, commercial banks and thrifts.  Rates are based on loans with an 80 percent loan-to-value ratio and points include the origination fee.  Base period and value for all indices is March 16, 1990=100.

Purchase Index vs 30 Yr Fixed

Refinance Index vs 30 Yr Fixed