The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending October 22, 2010. 

The MBA's loan application survey covers over 50% of all U.S. residential mortgage loan applications taken by retail mortgage bankers, commercial banks, and thrifts. The data gives economists a snapshot view of consumer demand for mortgage loans. In a low mortgage rate environment, a trend of increasing refinance applications implies consumers are seeking out a lower monthly payment. If consumers are able to increase disposable income through refinancing, it can be a positive for the economy as a whole (creates more consumer spending or allows debtors to pay down personal liabilities like credit cards). A falling trend of purchase applications indicates a decline in home buying demand, a negative for the housing industry and the economy as a whole.

Excerpts from the Release....

The Market Composite Index, a measure of mortgage loan application volume, increased 3.2 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 3.1 percent compared with the previous week.  The four week moving average for the seasonally adjusted Market Index is up 1.4 percent. 

The Refinance Index increased 3.0 percent from the previous week.  The four week moving average  is up 1.9 percent for the Refinance Index. The refinance share of mortgage activity decreased to 82.3 percent of total applications from 82.4 percent the previous week.

The seasonally adjusted Purchase Index increased 3.9 percent from one week earlier. The unadjusted Purchase Index increased 3.5 percent compared with the previous week and was 30.3 percent lower than the same week one year ago.
 The four week moving average is down 0.7 percent for the seasonally adjusted Purchase Index.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.25 percent from 4.34 percent, with points increasing to 1.0 from 0.81 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.  The 30-year contract rate matches the rate from the week ending October 1, 2010, which was the second lowest ever observed in this survey. The effective rate also decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.67 percent from 3.74 percent, with points decreasing to 0.96 from 1.00 (including the origination fee) for 80 percent LTV loans. The 15-year contract rate is the second lowest observed in this survey, with the lowest being 3.62 percent from two weeks ago. The effective rate also decreased from last week.

The adjustable-rate mortgage (ARM) share of activity decreased to 5.3 percent from 5.8 percent of total applications the previous week. The MBA is no longer covering 1-yr ARM rates/points.

The MBA anticipates the following...

Purchase originations should rise about 30 percent in 2011, as existing home sales recover and home prices stabilize, and should rise again in 2012 to $877 billion.  Refinance activity will decrease by 60 percent in 2011 to about $370 billion as mortgage rates increase and the pool of eligible borrowers shrinks, and fall further to $310 billion in 2012.

The MBA sees a slower loan production environment in 2011. READ MORE