Loan Applications Lower as Mortgage Rates Spike

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey* for the week ending July 1, 2011.

The gist of today's release is that any mini-refi-boom that may have precipated by recently lower rates is--SURPRISE!--sensitive to rising rates! The average contract interest rate for 30-year fixed-rate mortgages increased to 4.69 percent from 4.46 percent in the previous week. Refinance demand fell as a result. In the 3rd chart below, that relationship played out clearly last week. Expect any continued increases in rates to bring the Refinance Index back under 2500.

ANOTHER CHART: THE MORTGAGE RATES SPIKE

Excerpts from the Release...

The Market Composite Index, a measure of mortgage loan application volume, decreased 5.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 5.1 percent compared with the previous week. The four week moving average is down 0.5 percent.

The Refinance Index decreased 9.2 percent from the previous week. The four week moving average is down 1.1 percent. The refinance share of mortgage activity decreased to 66.4 percent of total applications from 69.5 percent the previous week. The Refinance Index has decreased for 3 consecutive weeks, reaching its lowest level since May 6, 2011.

The seasonally adjusted Purchase Index increased 4.8 percent from one week earlier. The unadjusted Purchase Index increased 4.4 percent compared with the previous week and was 11.7 percent higher than the same week one year ago. The four week moving average is up 0.8 percent.

The average contract interest rate for 30-year fixed-rate mortgages increased to 4.69 percent from 4.46 percent, with points decreasing to 0.90 from 1.19 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This is the highest 30-year rate recorded in the survey since the middle of May 2011. The effective rate also increased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.79 percent from 3.64 percent, with points decreasing to 0.88 from 1.11 (including the origination fee) for 80 percent LTV loans. This is the highest 15-year rate recorded in the survey since the beginning of May 2011. The effective rate also increased from last week.The adjustable-rate mortgage (ARM) share of activity decreased to 5.8 percent from 5.9 percent of total applications from the previous week.

The adjustable-rate mortgage (ARM) share of activity increased to 6.1 percent from 5.8 percent of total applications from the previous week.

* ABOUT: 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. It also allows debtors to pay down personal liabilities faster. A trend of declining purchase applications implies home buyer demand is shrinking.

Loan Applications Lower as Mortgage Rates Spike

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