Stock market volatility drove rates on the 30-year fixed-rate mortgage to hit a new low point for the year but it also contributed to a pull-back in the purchase market, holding the increase in mortgage application volume to just 4.1% for the week ended Aug. 12, according to the Mortgage Bankers Association.
The Refinance Index increased by 8%, but the organization added this is over 16% lower than this time last year. The seasonally adjusted Purchase Index fell 9.1% from the previous week. On an unadjusted basis, the Purchase Index is 1.1% lower than the same week in 2010.
Michael Fratantoni, MBA's vice president of research and economics, said it was not just the volatility in the stock market that drove interest rates down, but also signs that the economy is slowing. The result, he said, is that "purchase application activity fell sharply over the previous week, likely the result of potential homebuyers hesitant to purchase in this highly volatile and uncertain environment."
Refinance activity may be livelier than what the survey found. Fratantoni said MBA is transitioning to a new survey sample that will cover 75% of the retail market, rather than the 50% it does now. "That expanded sample showed a significantly larger increase in refinance applications than the current sample, with some lenders reporting increases in refinance applications in excess of 50% for the week. The big differences in refinance volumes were likely driven by the decisions of some lenders not to drop rates last week, largely due to the need to manage their pipelines."
The market share of refi applications increased to 78.8% from 75.6% one week prior. This is the highest share for refis since last November. MBA tracks activity through its proprietary application index.
The average contract interest rate for 30-year fixed-rate mortgages was down 5 basis points to 4.32% from 4.37%. Points fell to 0.87 from 1.07 (including the origination fee) for 80% loan-to-value ratio loans.
The average contract interest rate for the 15-year FRM has once again hit its lowest recorded level since the MBA Application Survey started in 1990, falling 5 basis points to 3.47% from 3.52%. Points increased to 1.08 from 0.96.
