The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending September 24, 2010.
The MBA's loan application survey covers over 50% of all U.S. residential mortgage loan applications taken by retail mortgage bankers, commercial banks, and thrifts. The data gives economists a snapshot view of consumer demand for mortgage loans.
In a low mortgage rate environment, a trend of increasing refinance applications implies consumers are seeking out a lower monthly payment. 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 (creates more consumer spending or allows debtors to pay down personal liabilities like credit cards). A falling trend of purchase applications indicates a decline in home buying demand, a negative for the housing industry and the economy as a whole.
Excerpts from the Release...
The Market Composite Index, a measure of mortgage loan application volume, decreased 0.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1.0 percent compared with the previous week. The four week moving average for the seasonally adjusted Market Index is down 3.3 percent.
The Refinance Index decreased 1.6 percent from the previous week, which is the fourth straight weekly decrease. The four week moving average is down 4.2 percent for the Refinance Index. The refinance share of mortgage activity decreased to 80.7 percent of total applications from 81.1 percent the previous week.
The seasonally adjusted Purchase Index increased 2.4 percent from one week earlier. The four week moving average is up 1.1 percent for the seasonally adjusted Purchase Index.
The increase in the Purchase Index was driven by a 4.5 percent increase in government purchase applications, while conventional purchase applications increased 0.8 percent. The unadjusted Purchase Index increased 1.5 percent compared with the previous week and was 32.4 percent lower than the same week one year ago.
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.38 percent from 4.44 percent, with points increasing to 1.01 from 0.81 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The 30-year contract rate is a new low for this survey. The previous low was 4.43 percent for the week ending August 27, 2010. The effective rate also decreased from last week.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.77 percent from 3.88 percent, with points increasing to 1.13 from 0.86 (including the origination fee) for 80 percent LTV loans. The 15-year contract rate is the lowest recorded in the survey, while the previous low was observed last week. The effective rate also decreased from last week.
The average contract interest rate for one-year ARMs increased to 7.04 percent from 6.96 percent, with points increasing to 0.22 from 0.21 (including the origination fee) for 80 percent LTV loans. The adjustable-rate mortgage (ARM) share of activity increased to 6.0 percent from 5.9 percent of total applications from the previous week.
The refi index is on a four week losing streak. I didn't get much feedback from originators on this question when I asked it last week...so here goes again: Are you still refinancing clients who've just refinanced in the past 20 months? Is business slower than it was in August? Do you think we've hit another peak in refinance demand?