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MBA: Mortgage Apps Jump as Low Rates Draw Consumers

Representing a nudge in the right direction for the origination market, the ""Mortgage Bankers Association"":http://www.mortgagebankers.org (MBA) reported a 13 percent swell in home loan applications submitted last week, up from the record low reported by the trade group just one week earlier. It was the biggest gain recorded in three months.


According to the MBA's ""Weekly Mortgage Applications Survey"":http://www.mortgagebankers.org/NewsandMedia/PressCenter/76876.htm, which measures trends in the mortgage lending industry across 15 indices, overall loan application volume increased by 13 percent on a seasonally adjusted basis and 24.5 percent on an unadjusted basis.

""Low rates are driving consumers back to loans,"" said Michael Fratantoni, MBA's VP of research and economics. ""Mortgage rates had dropped over eight [of] nine weeks and we're [at] four and a half percent for [30-year] fixed rates. For refinance borrowers, the [low] rate is the primary driver in their decisions to apply for new loans.""

MBA's Refinance Index jumped 16.5 percent for the week ending June 10. The refinance share of mortgage activity increased to 70.0 percent of total applications from 67.3 percent the previous week. This is the highest refinance share since late January.


The seasonally adjusted Purchase Index was up 4.5 percent compared to a week earlier. Unadjusted, the index climbed 14.2 percent from the previous week, representing a 6.1 percent boost from the same week in 2010.

Meanwhile, the four-week moving averages for the seasonally adjusted Market and Purchase Indices leapt 2.4 and 0.3 percent, respectively, while the same for the Refinance Index rose 3.1 percent.

MBA reported that interest rates for 30-year fixed-rate mortgages fell from 4.54 percent to 4.51 percent, hitting bottom for the first time since November 19th of last year. The points for these rates increased from 1.05 to 0.94 for 80 percent of the loan-to-value (LTV) ratio loans.

Fifteen-year fixed mortgages also held their lowest rate since November, remaining at 3.67 percent from last week, with points staying at 1.06 for 80 percent LTV.

Fratatoni said that the ""fairly big jump in [refinance] applications"" occurred in a market where homebuyers have less equity in their homes. He added that refi apps are still 28 percent below where they stood seven months ago.

He predicted an increase in loan rates ""over the next year to 18 months"" despite the low origination volume, attributing the hopeful rise to a ""slow but steady recovery in the broader economy and some improvement in the job market.""

As long-term treasury and mortgage rates follow short-term rates, Fratatoni added, fixed-year mortgage rates will trend upward, with refinance volume dipping. He anticipates short-term rates keeping home prices low, a variable that household income could complement if job growth trends upward.

MBA is a national association that represents the real estate finance industry.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.

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