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Wednesday, December 09, 2009

MBA: Mortgage Refinance Applications Increase

by Calculated Risk on 12/09/2009 08:46:00 AM

The MBA reports: Mortgage Applications Increase in Latest MBA Weekly Survey

The Market Composite Index, a measure of mortgage loan application volume, increased 8.5 percent on a seasonally adjusted basis from one week earlier. ...

The Refinance Index increased 11.1 percent from the previous week and the seasonally adjusted Purchase Index increased 4.0 percent from one week earlier.
The average contract interest rate for 30-year fixed-rate mortgages increased to 4.88 percent from 4.79 percent, with points increasing to 1.17 from 1.00 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This ends a six week run of declining 30-year fixed rates which may have triggered the increase in refinance applications.
emphasis added
MBA Purchase Index Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 2002.

In the past, the MBA index was somewhat predictive of future sales, but it has been questionable for some time. The increase in 2007 was due to the method used to construct the index: a combination of lender failures, and borrowers filing multiple applications pushed up the index in 2007 even though activity was actually declining.

Recently there has been a substantial number of cash buyers, so the MBA index missed the strength of the recent existing home sales increase. However - even with the increase in the purchase index this week - the recent plunge in the purchase index is probably worth watching.