The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Application Survey for the week ending August 12, 2010. MBA's Market Composite Index, a measure of mortgage application volume, increased 4.1 percent on a seasonally adjusted basis from one week earlier. This follows a jump of 21.7 percent recorded in the previous week. The current increase on an unadjusted basis was 3.6 percent although the index was 13.5 percent lower than during the same period in 2010. The four-week moving average for the seasonally adjusted Market Index is up 6.9 percent since last week.
The increases are being driven by refinancing which accounted for 78.8 percent of the market this week and 75.6 percent in the previous week. The refinancing share is the highest it has been since November 2010. The index measuring refinancing continued its upward move, increasing 8.0 percent from a week earlier. This index has jumped 38.4 points in two weeks. The index is down 16.3 percent year-over-year.
The Purchase Index decreased 9.1 percent from the previous week on a seasonally adjusted basis and down 10.1 percent on an unadjusted basis. The unadjusted index was also down from the same week in 2010 by 1.1 percent. The four-week moving average on the seasonally adjusted Refinancing index rose 10.1 percent while the moving average for the Purchase Index decreased 2.2 percent.
"Unprecedented volatility in the stock market last week amid additional signs that the economy has slowed led to further drops in mortgage rates, with the 15-year rate reaching a new low for the MBA survey," said Mike Fratantoni, MBA's Vice President of Research and Economics. "Purchase application activity fell sharply over the previous week, likely the result of potential homebuyers hesitant to purchase in this highly volatile and uncertain environment."
Fratantoni continued, "Refinance application volume increased substantially for the week, although there was substantial variation across the market. In September MBA's Weekly Applications Survey will transition to an expanded sample that covers 75% of the retail market rather than the current sample that covers roughly 50% of the retail market. That expanded sample showed a significantly larger increase in refinance applications than the current sample, with some lenders reporting increases in refinance applications in excess of 50 percent for the week. The big differences in refinance volumes were likely driven by the decisions of some lenders not to drop rates last week, largely due to the need to manage their pipelines."
Mortgage rates continued a three-week pull back from their pre-debt ceiling increases. The average contract interest rate for a 30-year fixed rate mortgages with an 80 percent loan-to-value (LTV) ratio was 4.32 percent with 0.87 point including the origination fee compared to 4.37 percent with 1.07 points a week earlier. This is a new low for 2011. The effective rate also decreased.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.47 percent from 3.52 percent, with points increasing to 1.08 from 0.96 for 80 percent LTV loans. The effective rate also decreased from last week. The 15-year contract rate is at lowest level in the history of this survey.
The adjustable-rate mortgage (ARM) share of activity decreased to 5.8 percent from 6.1 percent of total applications from the previous week.
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. Base period and value for all indexes is March 16, 1990=100.