MBA: Re-Fi Activity Plunges Despite Low Rates

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Extraordinarily low interest rates sparked an increase in mortgage applications for home purchases last week, but refinancing activity slumped badly, resulting in a decline in overall demand for mortgage loans.

In its weekly mortgage applications survey, the Mortgage Bankers Association reported that its market composite index, a measure of loan application volume, decreased 4.5 percent on a seasonally adjusted basis.

Unadjusted, the index decreased 5.8 percent from the previous week.

The MBA's data comes days after it was announced that existing home sales were up a record 10.1 percent in October. The Case-Shiller home price index also posted a slight improvement, as the report's index for the top 10 cities rose 0.4 percent in September.

This data, though mixed, provides signs of stabilization in the struggling housing market.

Interest rates on 30-year fixed-rate mortgages decreased from 4.83 percent to 4.82 percent, moving closer to the record-low rate of 4.61 percent set in March.

Rates on 15-year fixed-rate mortgages remained flat at 4.32 percent, while rates on one-year adjustable-rate mortgages decreased to 6.66 percent from 6.85 percent.

After six straight weeks of declines, purchase applications rose 9.6 percent from the previous week, when the purchase index hit its lowest level since November 1997. Unadjusted, purchase applications increased 4.9 percent from the prior week, and the purchase index was 13.7 percent lower than the same week in 2008.

Refinance applications decreased 9.5 percent from the previous week.

Refinance shares of mortgage activity decreased to 71.7 percent of total applications from 74.6 percent the week before. The ARM share of activity increased to 5.3 percent of applications from 5.1 percent the previous week.

The four week moving average for the seasonally adjusted market index increased, rising 0.5 percent. The same average for the seasonally adjusted purchase index is down 6.4 percent, while it is up 4.0 percent for the refinance index.

The MBA also added that the results for the current survey reflect revisions to the survey results for the week ending November 13. One of the participants in the survey revised its data to show higher application volume, and also reclassified some purchase loans as refinance loans, lowering the purchase index and raising the refinance index.

Extraordinarily low interest rates sparked an increase in mortgage applications for home purchases last week, but refinancing activity slumped badly, resulting in a decline in overall demand for mortgage loans. In its weekly mortgage applications survey, the Mortgage Bankers Association reported that its market composite index, a measure of loan application volume, decreased 4.5 percent on a seasonally adjusted basis. (Market News Provided by RTTNews)