Refinance Popularity Drives Up Mortgage Apps, But Will It Last?
Mortgage loan application volume rose across the board while purchase indexes decreased for the week ending Dec. 12, according to the weekly application survey released Wednesday by the Mortgage Bankers Association. The composite index of mortgage applications across the market came in at 841.4, an adjusted 2.9 percent increase over the previous week. On an unadjusted basis, the index increased 2.9 percent over last week and 37.3 percent over the same week last year. The refi index increased 5.6 percent from the previous week, bringing the refinance share of activity to 76.9 percent of total applications, compared with 74.3 percent last week, according to the MBA's data. The seasonally adjusted purchase index decreased 4.5 percent, with the conventional purchase index climbing 6.7 percent and the government purchase index remaining unchanged from last week. The adjustable-rate mortgage share of activity also remained unchanged at 1.1 percent of total applications. The MBA also reported interest rates down across the board, with 30-year fixed mortgage rates averaging 5.18 percent from 5.44 percent the previous week, 15-year fixed mortgage rates having decreased to 4.93 percent from 5.08 percent and one-year ARMs down to 6.63 percent from 6.76 percent the previous week. The data has not yet reflected the Federal Reserve's most recent action to influence lending with its announcement Tuesday that it has lowered the federal funds rate to a range of zero to 0.25 percent. An independent survey conducted by online mortgage resource Zillow Mortgage Marketplace, which allows borrowers to request personalized loan quotes based on information contributed by mortgage professionals, confirmed that refinance quote requests jumped significantly -- 230 percent -- to account for more than half of all requests submitted in the first half of December. Zillow Mortgage Marketplace, a branch of the Zillow, Inc. tree, also saw in its weekly study saw decreased average mortgage rates across the board, from 30- and 15-year FRMs to 5-1 ARMs. A separate mortgage applications study by Mortgage Maxx LLC agreed that volume declined 2.9 percent -- a rare agreement with the MBA figure -- for the same week. Publisher of the MAX index Paul Desclooux suggested REO sales continue to boost the application volume. He speculated that continued seasonal activity through the holiday season may further boost the volume upward by the beginning of 2009, but warned that any crucial action (like a reduction in Fed rates, perhaps?) could turn that outcome around. "As has been the case throughout this crisis, landmines to jumpstarting housing and refinancings remain lethal," Desclooux wrote. "How the total equation of asset values, credit constraints, consumer apathy, and lack of speculators ultimately squares with mortgage availability still a question mark." Desclooux attributed last week's volume gain as reported by the MAX -- which corrects for multiple applications in a single household -- to “the promise of 4.5 percent mortgage rates,” in reference to press leaks in the past weeks suggesting that the Treasury Department was readying a plan to intervene in secondary mortgage markets to push primary mortgage rates to a pre-set level, in an effort to stimulate demand. It's unclear what effect Treasury secretary Henry Paulson's statement late Tuesday refuting this rumored plan might have on application volume in coming weeks, or wether the Fed's action in reducing the federal funds rate -- the interest charged in lending between banks -- will spark optimism in consumer application activity. Wells Fargo & Co. (WFC) and Wachovia Corp. (WB) already announced hours after the rate cut that they were implementing a lower prime rate -- the benchmark used to calculate interest rates on corporate and consumer lending -- from 4 percent to 3.25 percent, suggesting that perhaps the Fed's rate cut may reach consumers in some fashion. Visit www.mortgagebankers.org, www.zillow.com/mortgage and www.mortgagemaxx.us for further information. Write to Diana Golobay at firstname.lastname@example.org. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.