There were continued indications during the week ended March 21 of the anticipated 2014 decrease in mortgage volume and the market's gradual shift to one dominated by purchasing rather than refinancing. The Mortgage Bankers Association (MBA) has projected a substantial reduction in the level of mortgage applications this year, induced principally by a decline in refinancing. In February the association said it expected a $1.1 trillion year, almost 40 percent below the $1.8 trillion volume in 2013. The purchase market is expected to increase modestly, but not enough to compensate for falling refinancing activity.
MBA's Weekly Mortgage Applications Survey was set against a rare revision to earlier data as MBA changed the previously reported level of the seasonally adjusted Market Composite Index for the week ended March 14 from -1.2 percent to an increase of 0.2 percent.
The index for the most recent week, a measure of overall mortgage application activity, declined 3.5 percent from the revised base. On an unadjusted basis the index was down 3 percent.
The Refinance Index dropped 8 percent from the previous week, driven by an 8.1 percent fall in conventional refinance applications and a 5.8 percent negative shift in the government refinance index which was at its lowest point since July 2011. Refinancing had a 54 percent share of total applications, down from 57 percent the previous week and the smallest share for refinancing since April 2010.
Refinance Index vs 30 Yr Fixed
The seasonally adjusted Purchase Index however increased 3 percent from the previous week with a 4.0 percent bump in conventional purchase applications. Government purchase applications were essentially unchanged. The unadjusted Purchase Index increased 3 percent week-over-week but was 17 percent below its level one year earlier.
Purchase Index vs 30 Yr Fixed
Interest rates were down on both a contract and an effective rate basis. The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($417,000 or less) increased to 4.56 percent, the highest level since January 2014, from 4.50 percent, with points increasing to 0.29 from 0.26. The jumbo 30-year FRM (balances above $417,000) increased to 4.45 percent from 4.39 percent, with points increasing to 0.27 from 0.19.
The average contract interest rate for 30-year FRM backed by the FHA increased to 4.16 percent from 4.13 percent, with points increasing to 0.23 from 0.18. .
The average contract interest rate for 15-year FRM increased to 3.62 percent, the highest level since January 2014, from 3.52 percent, with points decreasing to 0.24 from 0.25.
The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) increased to 3.22 percent, the highest level since January 2014, from 3.09 percent, with points decreasing to 0.32 from 0.38. ARMs had an 8 percent share of total volume, unchanged from the previous week
MBA's survey, which has been conducted since 1990, covers over 75 percent of all U.S. retail residential mortgage applications. Respondents include mortgage bankers, commercial banks and thrifts. Rate quotes are based on loans with an 80 percent loan to value ratio and points include the origination fee. Base period and value for all indexes is March 16, 1990=100.