Mortgage Refinance Volume Drops to 5-Year Low as Rates Climb

Mortgage Refinance Volume Drops to 5-Year Low as Rates ClimbThe volume of mortgage refinancing applications dropped last week to its lowest level since November 2008, a deeper drop than in previous weeks attributed mostly to the Federal Reserve’s move to start tapering its massive bond purchases in January.
The refinance share of mortgage activity decreased to 65 percent of total applications, from 66 percent the previous week. The adjustable-rate mortgage (ARM) share of activity rose to 8.3 percent of total applications, the highest level since July 2008.
Mortgage applications for both purchases and refinances decreased 6.3 percent last week, from one week earlier, according to data from the Mortgage Bankers Association released Tuesday for the week ending  Dec. 20, 2013.
The refinancing component of the index decreased 8 percent from the previous week. The purchases component decline 4 percent from one week earlier.
Meanwhile, rates on most 30-year fixed home loans increased to 4.64 percent, the highest level since September of this year.
“Following the Federal Reserve’s taper announcement, mortgage application volume dropped again last week, with rates increasing and refinance application volume falling to its lowest level since November 2008,” said Mike Fratantoni, MBA’s Vice President of Research and Economics.
Purchase application volume was also weak too, he added. Mortgage applications for the purchase of a home continue to run more than 10 percent below last year’s pace.
“Notably, government purchase application volume is almost 25 percent below where it was at this time last year, with the larger drop compared to conventional purchase likely due to the increase in FHA premiums over the course of the year,” Fratantoni said.
Here is the mortgage bankers’ overview of mortgage rates:

  • The average contract interest rate for 30-year fixed-rate mortgages, with conforming loan balances ($417,000 or less), increased to 4.64 percent, the highest level since September 2013, from 4.62 percent, for 80 percent loan-to-value ratio (LTV) loans.
  • The average contract interest rate for 30-year fixed-rate mortgages, with jumbo loan balances (greater than $417,000), increased to 4.63 percent, the highest level since September 2013, from 4.61 percent, for 80 percent LTV loans.
  • The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 4.29 percent from 4.25 percent for 80 percent LTV loans.
  • The average contract interest rate for 15-year fixed-rate mortgages increased to 3.74 percent, the highest level since September 2013, from 3.66 percent, for 80 percent LTV loans.
  • The average contract interest rate for 5/1 ARMs increased to 3.26 percent, the highest level since September 2013, from 3.20 percent, for 80 percent LTV loans.

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