Mortgage Bankers Weekly Update: Refinance Applications Jump as Rates Fall

Mortgage Bankers Association for the week of  10/13/2010

Market Composite Index: increased 14.6 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 14.8 percent compared with the previous week.

Refinance Index: increased 21.0 percent from the previous week.  The seasonally adjusted Purchase Index decreased 8.5 percent from one week earlier. The unadjusted Purchase Index decreased 8.3 percent compared with the previous week and was 37.1 percent lower than the same week one year ago.

Purchase Index:  Purchase activity remains generally weak, but applications for conventional purchase mortgages are now at their highest level since the beginning of May following the expiration of the tax credit.

Refinance Share of Mortgage Activity: increased to 83.1 percent of total applications from 78.9 percent the previous week and is the highest refinance share since January 2009

Arm Share: decreased to 5.4 percent from 6.1 percent of total applications from the previous week.

MBA outlook: (Excerpted from mbaa.org)

After five weeks of steadily declining rates to yet another new low, borrowers who had been on the fence jumped off, which factored into refinance activity surging more than 20 percent, said Michael Fratantoni, MBAs Vice President of Research and Economics.  Refinance application volumes are now close to the highest level this year.  Purchase activity remains generally weak, but applications for conventional purchase mortgages are now at their highest level since the beginning of May following the expiration of the tax credit.

We predict that mortgage originations will decrease to $1.4 trillion in 2010 from an estimated $2.1 trillion in 2009. Purchase activity continues to be weak, although it was given a brief boost in the spring by the tax credit program, while refinance activity is being propped up by mortgage rates that remain close to historical lows, although there is less refinancing going on now than in previous periods of comparably low mortgage rates. Purchase originations will fall to $539 billion from $740 billion in 2009 and refinance originations will decrease to about $910 billion in 2010 from $1.4 trillion in 2009. This months originations estimates for 2010 forward were revised downwards to reflect the weaker July data for home sales and housing starts.  

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