With the holiday season over, consumers have returned to the home buying market with application volume increasing nearly 3% on a seasonally adjusted basis according to the Mortgage Bankers Association.
On an unadjusted basis, application volume increased 45% over the previous week for the period ended Jan. 3. The most recent data were adjusted for New Year’s Day while the previous week’s was adjusted for Christmas.
Consumers are starting to take their New Year’s resolutions seriously and consolidate their debt by refinancing, says Bill Banfield, Quicken Loans vice president.
Or they have become more comfortable with buying and selling as home prices continue their upward march, he continues.
The new ability-to-repay requirement being implemented Friday should not have much of an effect on application volume going forward, says HSH.com vice president Keith Gumbinger.
"Lenders have been deeply scrutinizing borrower applications for several years, requiring plenty of documentation and doing their best to make certain that borrowers can afford the loan for which they've applied. Until Friday, that's been a kind of market-enforced discipline, and the implementation of ATR is more of a formalization, so it shouldn't disturb things too much, except perhaps slowing down the application-to-closing process somewhat," he says.
But the qualified mortgage rule is likely to result in some consumers having less access to credit and/or being offered above market interest rates and that could cut application activity, Gumbinger says.
The Refinance Index increased 5% during the week of Jan. 3 after falling by 9% Christmas week. The seasonally adjusted Purchase Index decreased 1% during the week of Jan. 3 but increased 2% during Christmas week. On an unadjusted basis, purchase application activity is up 42% for New Year’s week but is 20% lower than the same week one year ago.
Refis are now 63% of new applications, unchanged from the previous week.
The rate inversion between conforming and jumbo loans continues plus the spread between the two has increased in the past two weeks to six basis points.
For both New Year’s week and Christmas week, the average contract rate for 30-year conforming FRM is at 4.72% and for the 30-year FRM jumbo it is at 4.66%, the MBA says. The organization uses $417,000 as the conforming loan limit for survey purposes.
Since the inversion started until two weeks ago, the spread had only been in the range of one to two basis points.
On Federal Housing Administration-insured loans, the average contract rate is up one bp to 4.36%, while for the 15-year FRM, the rate is up four bps at 3.77%.
Meanwhile, the share of adjustable rate mortgage loan applications remains in the range of 8%. The average contract rate for the 5/1 ARM is 3.33%, up two bps.