Refinancing Rebounds But a Strong Bounce Seems Unlikely

The week after a decline in refinancings caused new application volume to drop, the Mortgage Bankers Association's Weekly Mortgage Applications Survey showed an improvement, but an economist for the organization said refi volume is unlikely to bounce very high. MBA's Market Composite Index for the week of Jan. 29, a measure of mortgage loan application volume, increased 21.0% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 23.5% compared with the previous week. The Refinance Index increased 26.3% from the previous week and the seasonally adjusted Purchase Index increased 10.3% from one week earlier. Michael Fratantoni, MBA's vice president of research and economics, noted that the both indices are at mid-December levels. "Rates continue to hover around 5%, quite low by historical standards, but are well above the record lows seen in 2009, and hence are not generating substantial refi volume. We expect that rates will rise over the next few months as the Federal Reserve winds down its MBS purchase program, and this will likely lead to a decline in refinance volume," he said. The market share of refi applications is 69.2%, an increase over the previous week's 67.6%. The market share of adjustable rate mortgage loan applications fell to 4.5%, down from 4.7% for the previous week. The average contract interest rate for 30-year fixed-rate mortgages fell one basis point to 5.01% from 5.02%, with points rising to 1.04 from 1 (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 one basis point to 4.33%. Rates for ARM loans have been much more volatile in recent weeks. In the current survey the average contract interest rate decreased by 14 basis points to 6.70%. The three previous weeks found this rate up 41 BPs, down 11 BPs, then up 12 BPs.