MBA: Rate Volatility Drives Increased Applications

A second week of interest rate declines finally brought consumers back to their mortgage originator, as the Mortgage Bankers Association's Market Composite Index for the week ended April 16, 2010 saw an increase in loan application volume. The MCI increased 13.6% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 13.9% compared with the previous week. According to Michael Fratantoni, MBA's vice president of research and economics, "Treasury rates fell last week causing a decline in mortgage rates. As a result, refinance applications picked up over the week, as some borrowers took advantage of this recent rate volatility to lock in a low fixed-rate loan. Purchase applications continued to increase coming out of the Easter holiday, as we approach the end of the homebuyer tax credit, and are up modestly over last month." The Refinance Index ended a five week long slide, increasing 15.8% from the previous week. The market share of refi applications increased slightly to 60% for the survey period, up from 58.9% during the previous week. The market share of adjustable rate mortgage applications fell to 6.0%, from 6.3% for the previous week. The decline in average contract interest rate for the 30-year fixed rate mortgage wiped out the remainder of the whopping 27 basis points rise two weeks ago to 5.31%. It is now at 5.04% for the current week with points increasing to 0.98 from 0.91 (including the origination fee) for loans with an 80% percent loan-to-value ratio, the association reported. The average contract interest rate for 15-year FRMs fell by 11 bps to 4.34%. The average contract interest rate for one-year ARMs fell 7 bps to 6.95%.