Wednesday, July 20, 2011

MBA: Mortgage Refinance Activity "Surges", Purchase activity flat

by Bill McBride on 7/20/2011 07:17:00 AM

The MBA reports: Refinance Applications Surge in Latest MBA Weekly Survey

The Refinance Index increased 23.1 percent from the previous week. The seasonally adjusted Purchase Index decreased 0.1 percent from one week earlier.
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"Ongoing turmoil in the financial markets primarily due to the sovereign debt crisis in Europe has brought mortgage rates back to their lowest levels of the year," said Michael Fratantoni, MBA's Vice President of Research and Economics. "Refinance applications have surged in response and the refinance index is at its second highest level of the year. One factor that may be contributing to this increase is that borrowers potentially impacted by impending decreases in the conforming loan limit may be opting to lock in fixed-rate financing now."
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The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.54 percent from 4.55 percent, with points decreasing to 0.98 from 0.99 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.
The following graph shows the MBA Purchase Index and four week moving average since 1990.

MBA Purchase Index Click on graph for larger image in graph gallery.

The recent decline in mortgage rates hasn't boosted purchase applications; the four week average of the purchase index is still mostly moving sideways at about 1997 levels.

Of course this doesn't include the large number of cash buyers ... but this suggests purchase activity remains fairly weak.