The volume of mortgage refinancing soared during the week ended April 13 according to data released this morning by the Mortgage Bankers Association (MBA). Its Weekly Mortgage Applications Survey reported that an increase in the Refinance Index of 13.5 percent drove the Market Composite Index up 6.9 percent on a seasonally adjusted basis and 6.5 percent unadjusted compared to the week ended April 6.
The increase in refinancing, which accounted for 75.2 percent of all mortgage applications during the week compared to 70.5 percent the previous week, more than offset a large drop in applications for purchase mortgages. Those applications, due almost entirely to a pull-back in FHA business, were down 11.2 percent on a seasonally adjusted basis from the previous week and 10.4 percent unadjusted. The Purchase Index was 13.9 percent lower than during the same week in 2011.
The four week moving average for the seasonally adjusted Market Index and the Refinance Index rose 1.60 percent and 2.36 percent respectively while the moving average for the seasonally adjusted Purchase Index was down 0.52 percent.
"Renewed concerns about sovereign debt in Europe led to a drop in rates last week, with the 30-year rate tying our survey low, reached in early February. Refinance activity picked up in response, increasing 13.5 percent for the week. Participants in our survey indicated that about 32 percent of this refinance volume was for HARP loans," said Jay Brinkmann, MBA's Chief Economist and SVP of Research and Education. "While purchase activity declined sharply for the week, this was mostly due to a 23 percent drop in applications for FHA purchase loans. This drop follows big increases in the demand for FHA loans over several weeks in anticipation of the FHA mortgage insurance premium increases that went into effect last week. This was the largest weekly drop in the government purchase index since the expiration of the first-time homebuyer tax credit in May 2010. The demand for conventional purchase loans was down only slightly."
Purchase Index vs 30 Yr Fixed
Refinance Index vs 30 Yr Fixed
As Brinkmann indicated, all interest rates tracked by the MBA's weekly survey declined during the week. The rate for 30-year fixed-rate mortgages (FRM) decreased to 4.05 percent with 0.45 point from 4.10 percent with 0.43 points for loans with a balance of $417,500 and to 4.36 percent from 4.43 percent (with points unchanged at 0.36) for those with larger balances. The average rate for 30-year FRM backed by the FHA decreased to 3.83 percent from 3.87 percent with points increasing from 0.55 to 0.61.
The rate for 15-year FRM was down 4 basis points to 3.33 with points increasing to 0.41 from 0.37 and the rate for 5/1 adjustable rate mortgages (ARMS) was 2.83 percent with 0.35 point compared to 2.89 percent with 0.38 point. The market share of ARM during the week decreased to 5.3 percent from 5.5 percent of total applications.
The effective rate of all the loans referenced above decreased during the week. Rates quoted are for loans with an 80 percent loan-to-value ratio and points included the origination fee.
In March the average loan size of purchase mortgages in the U.S. was $233,381, up from $225,463 in February. The average loan size for a refinance was $214,593, down from $222,048. The Pacific Region had the largest loans on average at $337,227 for purchases and $290,711 for refinancing.
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.