Mortgage Applications Surge with Large Drop in Rates

RISMEDIA, Dec. 4, 2008-The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the week ending November 28, 2008, which was a shortened week due to the Thanksgiving holiday. The Market Composite Index, a measure of mortgage loan application volume, was 857.7, an increase of 112.1% on a seasonally adjusted basis from 404.4 one week earlier. On an unadjusted basis, the Index increased 51.4% compared with the previous week and was down 21.9% compared with the same week one year earlier.

“Many borrowers missed an opportunity to take advantage when rates dropped sharply for a brief period when the GSEs were placed under conservatorship,” said Orawin Velz, associate vice president of Economic Forecasting. “When rates plummeted following the Fed’s announcement that it would buy GSE debt and MBS, many of those on the sidelines decided to quickly jump in and take advantage of lower rates before they began to rebound.”

The Refinance Index increased 203.3% to 3802.8 from the previous week and the seasonally adjusted Purchase Index increased 38.0% to 361.1 from one week earlier. The Conventional Purchase Index increased 37.4% while the Government Purchase Index (largely FHA) increased 39.2%. All results include an adjustment to account for the Thanksgiving holiday.

The four week moving average for the seasonally adjusted Market Index is up 29.7% this week. The four week moving average is up 9.5% for the seasonally adjusted Purchase Index, while this average is up 56.1% for the Refinance Index.

The refinance share of mortgage activity increased to 69.1% of total applications from 49.3% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 1.4% from 3.0% of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.47% from 5.99%, with points decreasing to 1.16 from 1.23 (including the origination fee) for 80% loan-to-value (LTV) ratio loans.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.13% from 5.78%, with points decreasing to 1.28 from 1.29 (including the origination fee) for 80% LTV loans.

The average contract interest rate for one-year ARMs decreased to 6.61% from 6.87%, with points decreasing to 0.52 from 0.64 (including the origination fee) for 80% LTV loans.

The survey covers approximately 50% of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100.

For more information, visit www.mortgagebankers.org.

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