Mortgage application volume slid 12% for the week

Mortgage applications fall 12.0%

According to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 19, 2012, the volume of mortgage applications fell 12.0 percent from the week prior. The Refinance Index decreased 13.0 percent from the previous week to the lowest level since late August, while the Purchase Index decreased 8.0 percent from one week earlier.

The refinance share of mortgage activity decreased to 81.0 percent of total applications from 82.0 percent the previous week, and the adjustable-rate mortgage (ARM) share of activity increased to 4.0 percent of total applications.

Resetting expectations

News today of falling applications comes on the heels of the MBA’s statement yesterday adjusting their forecasting, calling for a future decline in refinances and a rise in purchase originations, bucking the 2012 trend.

“We expected 2012 originations to be front-loaded in the first half of the year, with refis falling off with rate increases. Instead we saw the refinance market grow during the year due to a combination of low rates, thanks to QE3 and slowing global growth because of continuing problems in Europe, and adjustments in the HARP and FHA refinance programs,” said Jay Brinkmann, MBA’s Chief Economist. “We expect 2013 refinance originations to play out like our original expectations for 2012, with a long tail of refis extending through the first half of the year followed by a rapid drop-off in the second half.”

Brinkmann continued, “In contrast, we expect a 16% increase in purchase originations in 2013 over 2012, with every quarter in 2013 exceeding the same quarter of 2012. The increase in purchase volumes will be driven by continued modest growth in the economy, an increase in owner-occupied sales financed with mortgages as opposed to cash purchases by investors, an increase in new home sales and a small increase in average home prices. This assumes that changes in the regulatory environment during 2013 are not unduly disruptive in terms of their constraints on available credit, and FHA and/or Fannie Mae/Freddie Mac do not notably tighten their credit policies. FHA and other government programs accounted for 43 percent of purchase originations in 2011 and have been averaging 38 percent of purchase applications in 2012.”

Current average mortgage rates

• The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.63 percent from 3.57 percent, with points increasing to 0.45 from  0.44 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.  The effective rate increased from last week. The 30-year fixed rate increased for three consecutive weeks to the highest level since late September.
• The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) increased to 3.85 percent from 3.81 percent, with points remaining unchanged at 0.42 (including the origination fee) for 80 percent LTV loans.  The effective rate increased from last week.
• The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.41 percent from 3.34 percent, with points decreasing to 0.61 from 0.82 (including the origination fee) for 80 percent LTV loans.  The effective rate increased from last week.
• The average contract interest rate for 15-year fixed-rate mortgages increased to 2.96 percent from 2.87 percent, with points decreasing to 0.36 from 0.39 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
• The average contract interest rate for 5/1 ARMs increased to 2.72 percent from 2.59 percent, with points decreasing to 0.33 from 0.35 (including the origination fee) for 80 percent LTV loans.  The effective rate increased from last week.