Mortgage Applications Decline Despite New Interest Rate Lows

December 21, 2011 (Chris Moore)

Last week’s refi surge was short-lived despite even lower interest rates this week and home buyers continued to sit on the sidelines as the refi share of mortgage applications jumped to over 80 percent according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending December 16, 2011.

The Market Composite Index, a measure of mortgage loan application volume which includes purchase applications and refinance applications, decreased a seasonally adjusted 2.6 percent from the previous week.

On an unadjusted basis, the Index decreased 2.8 percent from the previous week. The four week moving average for the seasonally adjusted Market Index is up 0.26 percent.

Michael Fratantoni, MBA’s Vice President of Research and Economics, stated, “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. 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.”

Purchase Applications:

The seasonally adjusted Purchase Index decreased 4.9 percent from the previous week. The four week moving average is down 1.53 percent for the adjusted Purchase Index.

The unadjusted Purchase Index decreased 7.5 percent compared with the previous week and was 6.9 percent lower than the same week a year ago.

Refinance Applications:

The Refinance Index decreased 1.6 percent from the previous week. The four week moving average for the Index is up 1.32 percent.

The refinance share of mortgage activity increased to 80.7 percent of total applications from 79.7 percent the previous week.

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)

4.08*

4.12

0.49

0.45

Decreased

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

4.44*

4.47

0.37

0.45

Decreased

15-Year FRM

3.39*

3.44

0.40

0.52

Decreased

FHA 30-Year

3.93*

3.94

0.63

0.68

Decreased

5/1 ARM

2.90*

2.93

0.46

0.53

Decreased

* New low

The adjustable-rate mortgage (ARM) share of activity decreased to 5.1 percent of total applications from 5.6 percent the previous week.

This week’s results are based on an enhanced sample which captures more than 75% of all retail and consumer direct channel mortgage applications, compared to 50% previously.

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

Sources:
Mortgage Bankers Association