The summer surge that wasn’t now appears to be firmly in prospective buyers’ rearview mirrors, according to data released Wednesday morning by the Mortgage Bankers Association. The association’s weekly mortgage application survey found that a composite index of purchase and refinance activity fell 8.7 percent on a seasonally-adjusted basis to 508.4 for the week ended June 13. Overall application activity is 21.3 percent below year-ago levels, as well, thanks largely to interest rates that appear to be quickly increasing. The MBA application index is calibrated to March 16, 1990; a reading of 508.4 means that application activity was roughly five times greater than when the index was first established. This week’s dismal application total is approaching the six-year low set just two weeks ago, when the composite index read just 502.3. The drop in the MBA index mirrored the statistics released Monday by a separate application index known as “the Max” by Wall Street prepayment researchers. The Max index fell 8.4 percent nationally, and dropped 10.6 percent in California alone; the index corrects for repeat applications and can, at times, diverge from the data reported by the MBA. “With a non-existent refi-arbitrage and discouraging qualifying impediments, mortgage applications [are likely] to remain under severe pressure,” said Paul Descloux, who publishes the Max index. “Foreclosure sales are now a significant portion of once pristine home sales, as available inventory still swells.” Driving down applications this week were both refinance and purchase activity, the MBA said. A subindex of refinance application activity fell 15 percent, while purchased decreased 4.3 percent versus one week earlier. The lone bright spot was a continued spike in FHA application activity, which the MBA said rose 4 percent during the week. After rebounding slightly while the mortgage rate outlook was improving, adjustable-rate mortgage share of activity decreased to 9.7 percent from 10.3 percent of total applications from the previous week, signaling borrowers’ strong preference for fixed-rate and more stable mortgages. The MBA’s data found that the average contract interest rate for 30-year fixed-rate mortgages increased to 6.57 percent from 6.24 percent, with points decreasing to 1.1 from 1.12 for 80 percent LTV ratio loans. Formal rate surveys by both Bankrate.com and Freddie Mac (FRE) are due to be released on Thursday. For more information, visit http://www.mortgagebankers.org. Disclosure: The author held no positions in FRE when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
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