Refinance Demand Finally Makes Its Big Move.
The Mortgage Bankers Association (MBA) today released its Weekly Mortgage
Applications Survey* for the week ending August 5th, 2011.
On May 18th, 2011 we wrote: "Right now we're witnessing the beginnings of a mini-refinance boom in
the primary mortgage market, but there has been little activity in the
secondary market that would indicate increased rate locking by
consumers." says MND's Managing Editor Adam Quinones. "However, if
conventional 30-year rates reach 4.25%, we'd expect to see a mini-boom
scenario play out. There is much stored demand in the system as
many borrowers missed the boat on record low rates in October and early
November. This crowd is waiting in the wings for those rates to return.
Whether or not that happens is still very much up in the air"
Almost three-months later that mini-boom scenario seems to be playing out. This comes after mortgage rates dove toward record lows last week. The rally didn't stop on August 5th though, consumer borrowing costs continued to move lower this week, and sharply! The crowd who missed the boat in October/November 2010 is now getting a second chance. We should see the refinance index move even higher next week.
Excerpts from the Release...
The Market Composite Index, a measure of mortgage loan application volume,
increased 21.7 percent on a seasonally adjusted basis from one week earlier. On
an unadjusted basis, the Index increased 20.9 percent compared with the
previous week. The four week moving average for the seasonally adjusted
Market Index is up 9.7.
The Refinance Index increased 30.4 percent from the previous week. The
four week moving average is up 13.7 percent.
The seasonally adjusted Purchase Index decreased 0.9 percent from one week
earlier. The unadjusted Purchase Index decreased 1.2 percent compared with the
previous week and was 4.9 percent higher than the same week one year ago.
The four week moving average is unchanged.
The average contract interest rate for 30-year fixed-rate mortgages
decreased to 4.37 percent from 4.45 percent, with points increasing to 1.07
from 0.78 (including the origination fee) for 80 percent loan-to-value (LTV)
ratio loans. The effective rate also decreased from last week.
The average contract interest rate for 15-year fixed-rate mortgages remained
unchanged at 3.52 percent, with points decreasing to 0.96 from 1.02 (including
the origination fee) for 80 percent LTV loans. The effective rate also
decreased from last week.
The refinance share of mortgage activity increased to 75.6 percent of total
applications from 70.1 percent the previous week. The adjustable-rate mortgage
(ARM) share of activity decreased to 6.1 percent from 6.6 percent of total
applications from the previous week.
* ABOUT: The MBA's loan application survey covers over 50% of all U.S.
residential mortgage loan applications taken by mortgage bankers, commercial
banks, and thrifts. The data gives economists a snapshot view of consumer
demand for mortgage loans. In a falling mortgage rate environment, a trend of
increasing refinance applications implies consumers are seeking out lower
monthly payments. If consumers are able to reduce their monthly mortgage
payment and increase disposable income through refinancing, it can be a
positive for the economy as a whole (may boost consumer spending. It also
allows debtors to pay down personal liabilities faster. A trend of declining
purchase applications implies home buyer demand is shrinking.