Higher Interest Rates Puts the Brakes on Refinance Applications

March 21, 2012 (Chris Moore)

Mortgage application volume fell again last week as increasing interest rates put the brakes on refinance application activity according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 16, 2012.

The Market Composite Index, a measure of mortgage loan application volume which includes purchase applications and refinance applications, decreased a seasonally adjusted 7.4 percent from the previous week.

On an unadjusted basis, the Index decreased 7.1 percent from the previous week. The four week moving average for the seasonally adjusted Market Index is down 2.79 percent.

Purchase Applications:

The seasonally adjusted Purchase Index decreased 1.0 percent from the previous week. The four week moving average is up 3.25 percent for the adjusted Purchase Index.

The unadjusted Purchase Index decreased 0.6 percent compared with the previous week and was 1.9 percent lower than the same week a year ago.

Refinance Applications:

The Refinance Index decreased 9.3 percent from the previous week. The four week moving average for the Index is down 4.31 percent.

The refinance share of mortgage activity decreased to 73.4 percent of total applications from 77.0 percent the previous week.

Jay Brinkmann, MBA’s Senior Vice President of Research and Education, stated, “Some of the largest institutions are reporting that the HARP share of their refinances remained at about 30% last week, but HARP volume is not equal across the country. The states that I started referring to years ago as the sand states that had the worst delinquencies we now should start calling the HARP states for mortgage refinances. We saw big state-level differences in refinance applications for February over January: Florida was up 49%, Arizona was up 61%, and Nevada was up 71%. Refinances in the rest of the country were generally flat or even down. For example, Texas had no change, Colorado was down 3%, Connecticut was up only 2%, and Virginia was up 1%. HARP clearly is a driving force in those states that saw the most defaults and the biggest drops in home equity.”

Mortgage Interest Rates:

Average Contract Mortgages Rates
(80% loan-to-value)

Type of
Loan

Interest Rate (%)

Points

Effective Rate

Current

Previous

Current

Previous

30-Year FRM Conforming
($417,500 or less)

4.19

4.06

0.47

0.43

Increased

30-Year FRM Non-Conforming
($417,501 or more)

4.49

4.39

0.38

0.39

Increased

15-Year FRM

3.47

3.36

0.40

0.34

Increased

FHA 30-Year

3.93

3.82

0.48

0.55

Increased

5/1 ARM

2.90

2.81

0.44

0.37

Increased

The adjustable-rate mortgage (ARM) share of activity decreased to 5.6 percent of total applications from 5.8 percent the previous week.

Tags: MBA, home purchase applications, mortgage rates, fixed rate mortgage, adjustable rate mortgage, refinance, interest rate

Sources:
Mortgage Bankers Association