Rates Up for 5th Week; Refi Volume Declines

MBA (2/27/2008 ) Kemp, Carolyn
Mortgage application activity fell by 19 percent last week, driven by a sharp decline in refinance activity as key interest rates rose for the fifth consecutive week, according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending Feb. 22.
The average contract interest rate for 30-year fixed-rate mortgages increased to 6.27 percent from 6.09 percent, with points increasing to 1.15 from 1.10 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. Since Jan. 18, when the rate was 5.49 percent, the 30-year rate has risen by 78 basis points.

The rise in rates has effectively dampened refinance applications. The seasonally adjusted Refinance Index decreased 30.4 percent to 2458.9 from 3533.8 the previous week. Over the past five weeks, the Refinance Index has lost nearly half its volume, from a high of 5103.6 on Jan. 25. The four-week moving average is down by 14.2 percent to 3987.0 from 4648.2. The refinance share of mortgage activity decreased to 52.0 percent of total applications from 61.7 percent the previous week.

The drop in refinances also had an impact on the Market Composite Index, which fell to 665.1, a decrease of 19.2 percent on a seasonally adjusted basis from 822.8 one week earlier. On an unadjusted basis, the Index decreased 25.8 percent compared with the previous week but was up 5.1 percent compared with the same week one year earlier. The four-week moving average for the seasonally adjusted Market Index is down 9.7 percent to 909.5 from 1007.0.

Purchase applications, however, showed a slight uptick. The seasonally adjusted Purchase Index increased 0.2 percent to 358.2 from 357.6 one week earlier. The Conventional Purchase Index decreased by 1.5 percent, while the Government Purchase Index (largely FHA) increased 8.4 percent. On an unadjusted basis, the Purchase Index decreased 7.1 percent to 350.7 from 377.3 the previous week. The four-week moving average fell by 0.2 percent to 381.3 from 382.2.

The seasonally adjusted Conventional Index decreased 21.4 percent to 907.1 from 1153.4 the previous week; the seasonally adjusted Government Index decreased 3.8 percent to 261.5 from 271.8 the previous week.

Other rates increased as well. The average contract interest rate for 15-year fixed-rate mortgages increased to 5.77 percent from 5.55 percent, with points decreasing to 1.01 from 1.08 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for one-year adjustable-rate mortgages increased to 5.84 percent from 5.72 percent, with points decreasing to 0.86 from 0.91 (including the origination fee) for 80 percent LTV loans. The ARM share of activity increased to 15.0 percent from 12.8 percent of total applications from the previous week.

The survey covers 50 percent of all U.S. retail residential mortgage originations and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.