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Economy in Brief

U.S. Mortgage Refinancings Drop Sharply With Higher Rates
by Tom Moeller  May 29, 2013

Higher interest rates prompted an immediate reaction in the mortgage loan market. Last week's increase in the effective rate on a 15-year mortgage to 3.17% left it at it's highest level since the last week of August. In tandem, the index of total mortgage applications from the Mortgage Bankers Association slumped 8.8% (-9.2% y/y), its third consecutive weekly decline. The drop reflected a 12.3% shortfall (-15.2% y/y) in applications to refinance an existing loan. Conversely, home purchase mortgage applications gained 2.6% (13.5% y/y) as home purchases continued their improvement since 2010.

Accompanying the rise in 15-year mortgage rates was the effective rate on a 30-year fixed rate loan. It increased to 4.01% last week while the rate on a Jumbo 30-year loan jumped to 4.15%. The 84 basis point spread between 15- and 30-year loan rates was nearly its record. The effective interest rate on an adjustable 5-year mortgage was stable w/w at 2.69%, up just slightly versus its low of 2.59% at the beginning of this month.

Applications for fixed interest rate loans fell 9.6% y/y while adjustable rate loan applications slipped 1.2% y/y. The average mortgage loan size was $222,500. The average size loan for home purchases was $267,100 last week while for refinancings it was $204,200.

The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. The figures for weekly mortgage applications are available in Haver's SURVEYW database.  

 

MBA Mortgage Applications (SA, 3/16/90=100) 05/24/13 05/17/13 05/10/13 Y/Y% 2012 2011 2010
Total Market Index 721.4 791.0 876.6 -9.2 813.8 572.3 659.3
 Purchase 210.6 205.3 211.6 13.5 187.8 182.6 199.8
 Refinancing 3,723.3 4,245.5 4,805.8 -15.2 4,505.0 2,858.4 3,348.1
15-Year Mortgage Effective Interest Rate (%) 3.17 3.04 2.96 3.36
(5/12)
3.25 3.97 4.39
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