Total Applications Drop, But Purchases Point to Recovery

Rising interest rates contributed to a declining Mortgage Bankers Association Market Composite Index for the week ended Aug. 7 when compared with the previous week, but continued increases in purchase activity suggest a housing recovery could help bolster volumes going forward. The MCI is calculated from the MBA's Weekly Mortgage Applications Survey; it was down 3.5% on a seasonally adjusted basis from the week ended July 31 and on an unadjusted basis, the Index decreased 3.7% compared with the previous week and increased 16.1% compared with the same week one year earlier. MBA stopped disclosing index values with the July 31 data release. The Refinance Index decreased 7.2% from the previous week. The seasonally adjusted Purchase Index increased 1.1% from one week earlier. This is the third gain in the Purchase Index in the past four weeks, MBA said. Looking at the Purchase Index's seasonally adjusted, four-week moving average gain of 0.8%, MBA said this behavior is consistent with the view that home sales hit bottom earlier this year and are now in a gradual recovery. The share of refinancing applications decreased to 52.3% of total applications from 54.2% the previous week and the seasonally adjusted, four-week moving average for the Refi Index is down 2.0%. The adjustable-rate mortgage share of activity increased to 5.8% from 5.4% of total applications the previous week. The average contract interest rate for 30-year fixed-rate mortgages increased to 5.38% from 5.17%, with points increasing to 1.18 from 1.02 (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 increased 11 basis points to 4.71%, while for one-year adjustable rate loans, it increased by 4 BP to 6.71%.