The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending April 8, 2011.
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. Also allows debtors to pay down personal liabilities faster). A trend of declining purchase applications implies home buyer demand is shrinking.
Excerpts from the Release...
The Market Composite Index, a measure of mortgage loan application volume, decreased 6.7 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 6.3 percent compared with the previous week.
The Refinance Index decreased 7.7 percent to its lowest level since February 11, 2011. The four week moving average is down 5.3 percent. The refinance share of mortgage activity decreased to 60.3 percent of total applications from 61.2 percent the previous week. This is the lowest refinance share since May 7, 2010.
The seasonally adjusted Purchase Index decreased 4.7 percent from one week earlier. The unadjusted Purchase Index decreased 4.1 percent compared with the previous week and was 11.4 percent lower than the same week one year ago. The four week moving average is up 0.7 percent.
The average contract interest rate for 30-year fixed-rate mortgages
increased for the fourth consecutive week to 4.98 percent from 4.93 percent,
with points increasing to 0.93 from 0.69 (including the origination fee) for 80
percent loan-to-value (LTV) ratio loans. This is the highest average contract
rate reported since February 18, 2011. The effective rate also increased
from last week.
The average contract interest rate for 15-year fixed-rate mortgages increased to 4.17 percent from 4.14 percent, with points increasing to 1.22 from 1.09 (including the origination fee) for 80 percent LTV loans. The effective rate also increased from last week.
This is the explanation we offered two weeks ago on reduced loan demand. From Pool of Eligible Refinance Candidates Dried Up at Current Rates...
"Recently lower mortgage rates have done little to motivate potential refinance candidates." said MND's Managing Editor Adam Quinones. "This isn't a big surprise as most qualified borrowers simply don't have an incentive to refinance because they already did last year when rates were near record lows. Other than that, qualification issues continue to prevent many folks from lowering their monthly payment. We do however expect a modest increase in purchase activity heading into the spring buying season."
Rates have moved higher since we shared that observation two weeks ago, and refinance demand has suffered as a result. No surprises there! We are however still hearing a considerable amount of chatter on the street regarding a seasonal increase in purchase demand. The consensus from originators and pipeline hedgers is for the majority of those deals to close in May and June. Are you seeing the same thing?