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Mortgage Applications Jump to Seasonal 6.3%

Mortgage application volume jumped from the previous week by 6.3 percent, reflecting the highly attractive plunge by interest rates to record lows, according to the ""Mortgage Bankers Association"":http://www.mbaa.org/default.htm (MBA). Even so, the good news comes amid a fall in home valuations and cash buyer interest, which ""Capital Economics"":http://www.capitaleconomics.com/ says will likely depress sales activity across the housing market.


Releasing the ""_Weekly Mortgage Applications Survey_"":http://www.mbaa.org/NewsandMedia/PressCenter/77912.htm, a measure of mortgage application volume across several indices, the MBA found numbers falling by a seasonally adjusted 6.3 percent. The MBA's Mortgage Composite Index saw application volume plummet by a seasonally unadjusted 15.4 percent by comparison.

While mortgage application volume ticked up on a seasonal basis, the MBA's Refinance Index noted a seasonally adjusted 6.0-percent uptick that served as a stopgap for weekly declines consecutively spanning three weeks.

On a seasonally unadjusted basis, refinance applications declined among mortgage loan applications by 15.2 percent, some 23 percent lower than activity recorded during the same week in 2010, according to the trade group. Refinancing activity leaped to 77.3 percent, up from 77.1 percent of applications from the last week.

The MBA's Purchase Index offered a 7.0-percent increase on a seasonally adjusted basis, while acknowledging a 16.2-percent fall on a seasonally unadjusted basis. Meanwhile, the four-week moving average shifted up by a seasonally adjusted 0.5 percent astride the Purchase Index, still 3.9 percent below for the Refinance Index.

The numbers for benchmark loans, including contract interest rates for fixed-rate mortgages and adjustable-rate mortgages (ARMs), smashed records by falling to new lows over the past week.


Thirty-year loans saw their interest rates decline from 4.23 percent to 4.17 percent on average, with origination points falling from 1.04 to 0.97 for 80-percent loan-to-value ratio loans.

For 15-year fixed-rate loans, contract interest rates fell on average to 3.40 percent, down from 3.41 percent, alongside origination points that jumped from 0.94 to 1.17 for 80-percent loan-to-value loans.

High tides for mortgage loan application volume follows ""rock-bottom numbers for mortgage rates"":https://themreport.com/articles/plummeting-mortgage-rates-set-new-records-2011-09-08. Mortgage giant ""Freddie Mac"":http://www.freddiemac.com/ and finance Web site ""Bankrate.com"":http://www.bankrate.com/ record new lows of 4.12 percent and 4.35 percent, respectively, for 30-year fixed-rate mortgages last week.

Despite the upswing in application volume, Paul Dales, a senior U.S economist with Capital Economics, wrote in a weekly housing update that cash buyers and overseas investors, widely regarded as a boon for the markets, will likely continue their exodus from purchase activity.

""Mortgage rates have fallen back to a record low at the same time that housing has become more undervalued than ever before,"" he said. ""In other words, the valuations and affordability climate has never been better.""

Among other market trends, Dales attributed low existing-home sales activity to a ""meaningful decline in the number of homes for sale has been offset by the weakening in sale, leaving the imbalance between supply and demand largely unchanged.""

Speaking to _MReport_ at the ""Five Star Default Servicing Conference and Expo"":http://www.thefivestar.com/fsc-2011/ in Dallas, Texas, Frank Nothaft, VP and chief economist for Freddie Mac, ascribed a chronic lack of demand to widespread worry among consumers.

""Affordability is extraordinarily high for potential first-time homebuyers, and yet we don't see home sales picking up appreciably,"" he said. He pointed to two reasons, explaining that ""consumers are very worried about their economic well-being, and when they are worried about their well-being, they are unlikely to go out and├â┬ó├óÔÇÜ┬¼├é┬ª buy an expensive item like a house.""

He added that ""many potential homebuyers think maybe home prices haven't bottomed out yet├â┬ó├óÔÇÜ┬¼├é┬ª so they will hold out on their purchases.""

[Note: ""The Five Star Institute"":http://www.thefivestar.com/#/home, the parent company for _MReport_, organized the Five Star Default Servicing Conference and Expo.]

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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