The Mortgage Bankers Association's (MBA) Market Composite Index decreased 2.6 percent on a seasonally adjusted basis during the week ended December 16.  The Index, the result of the Association's Weekly Mortgage Applications Survey, was down 2.8 percent from the previous week on an unadjusted basis.

The Refinance Index was 1.6 percent lower for the week than during the week ended December 9 while the Purchase Index decreased 4.9 percent on a seasonally adjusted basis.  On an unadjusted basis the Purchase Index was down 7.5 percent compared to the previous week and 6.9 percent compared to the same week in 2010.

The four week moving averages for the Market Index and the Refinance Index rose by 0.26 percent and 1.32 percent while the moving average for the seasonally adjusted Purchase Index was down 1.53 percent.

Applications for refinancing garnered the highest share of total applications of the year at 80.7 percent, up from 79.7 percent the previous week and the share of applications activity for adjustable-rate mortgages (ARM) hit its 2011 low at 5.1 percent.  The ARM share was 5.6 percent the previous week.

During November loans for home purchase had an average size of $217,774 compared to $213,430 in October.  The average size of a loan used for refinancing was $220,523, up from $217,153 in October.  Government guaranteed purchase loans averaged $170,742, a substantial decrease from the average of $186,263 in October.  The Pacific region had the highest loan sizes; $308,307 for purchase loans and $304,509 for refinancing. 

Contract interest rates were lower for all loan types with 30-year jumbo, 15-year fixed, and ARMs reaching the lowest level of the year.  The effective rate for each loan type also decreased.  The average rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances of $417,500 or less was 4.08 percent, down 4 basis points from the previous week with points, including the origination fee, increasing from 0.45 to 0.49.  Thirty-year jumbo FRM rates averaged 4.44 percent with 0.37 point, down from 4.47 percent with 0.45 point a week earlier.  FHA backed mortgages with a 30-year fixed-rate term averaged 3.93 percent with 0.63 points compared to 3.94 percent with 0.68 point.  Rates for 15-year FRM were at 3.39 percent with 0.40 point from 3.44 percent with 0.52 point and the 5/1 ARM averaged 2.90 percent with 0.46 point compared to 2.93 percent with 0.53 point.  All rates are for loans with an 80 percent loan to value ratio.

"Continued anxiety surrounding the fragile economic situation in Europe led interest rates lower last week. However, refinance applications fell slightly, and purchase applications dropped further as we head into the end of the year," said Michael Fratantoni, MBA's Vice President of Research and Economics. "Remarkably low rates are not enough, as many homeowners continue to hold back due to lack of equity in their properties, poor credit and a weak job market."

MBA's Weekly Application 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.

Purchase Index vs 30 Yr Fixed

Refinance Index vs 30 Yr Fixed