The Mortgage Bankers Association reported a large drop in mortgage applications last week, though the drop was driven heavily by a 48% drop in the interest rate sensitive refinance applications after mortgage rates broke their down trend the week before. Purchase applications fell 2.9%. Both the Mortgage Bankers Association and Freddie Mac reported 30-year Fixed Rate Mortgage (FRM) rates just above 5% and 15-year FRM rates below 5%. At the current rates an 8.5% 30-year mortgage could be refinanced into a 15-year mortgage at roughly the same payment – reason enough to refinance for anyone with 3 to 5 years on a subprime loan who can qualify now for prime rates.

Housing affordability is very strong, putting some legs under the market going forward, when employment stabilizes. According to Frank Nothaft, Freddie Mac chief economist:

Both the S&P/Case-Shiller® 20-city composite index, which registered an 18 percent annual decline through November, and the National Association of Realtors® (NAR) sales data, down 15 percent in December from a year ago, indicate sharply lower house prices across many U.S. metropolitan areas. At the same time, interest rates for 30-year fixed-rate mortgages reached a 50-year low toward the end of December. These two factors contributed to housing affordability reaching its highest level since 1973, as measured by the NAR’s monthly affordability index and help to explain the 7.0 percent increase in existing home sales in December.

Mortgage Bankers Association Average Mortgage Rates

30-year FRM: 5.22%, 1.05 points*
15-year FRM: 4.98%, 1.13 points
1-year ARM: 5.96%, 0.06 points

Freddie Mac Conforming Rates At a Glance

• 30-year FRM: 5.10%, 0.7 point
• 15-year FRM: 4.80%, 0.7 point
• 5-year hybrid ARM: 5.27%, 0.6 point
• 1-year ARM: 4.9%, 0.6 point

* Points reported by Mortgage Bankers Association in this survey include origination fees as well as traditional discount points. Average rates are based on an 80% LTV loan. This means a loan amount no more than 80% of the property value as determined by the lower of the purchase price or appraised value. Typically this means a 20% down payment, though an 80% loan can also be achieved with a second mortgage carried by the seller or a third party lender for the difference between the actual down payment and 20%.

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MORTGAGE RATES HOLD STEADY ACCORDING TO FREDDIE MAC’S WEEKLY SURVEY

“Mortgage rates held steady this week,” said Frank Nothaft, Freddie Mac vice president and chief economist. “The index of leading indicators rose 0.3 percent in December, the first increase in 6 months, fueled by an expansion in the money supply. However, the Federal Reserve acknowledged in its January 28th policy committee statement that since December the economy has weakened further.
“Both the S&P/Case-Shiller® 20-city composite index, which registered an 18 percent annual decline through November, and the National Association of Realtors® (NAR) sales data, down 15 percent in December from a year ago, indicate sharply lower house prices across many U.S. metropolitan areas. At the same time, interest rates for 30-year fixed-rate mortgages reached a 50-year low toward the end of December. These two factors contributed to housing affordability reaching its highest level since 1973, as measured by the NAR’s monthly affordability index and help to explain the 7.0 percent increase in existing home sales in December.”

Mortgage Applications Fall In Latest MBA Weekly Survey

WASHINGTON, D.C. (January 28, 2009) — The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending January 23, 2009.  The Market Composite Index, a measure of mortgage loan application volume, was 732.1, a decrease of 38.8 percent on a seasonally adjusted basis from 1195.3 one week earlier.  This week’s results included an adjustment to account for the shortened week due to the Martin Luther King Jr. holiday. On an unadjusted basis, the Index decreased 46.5 percent compared with the previous week and 40.4 percent compared with the same week one year earlier.
The Refinance Index decreased 48 percent to 3373.9 from 6491.8 the previous week and the seasonally adjusted Purchase Index decreased 2.9 percent to 294.3 from 303.1 one week earlier.  The Conventional Purchase Index decreased 7.8 percent while the Government Purchase Index (largely FHA) increased 8.8 percent.
 
The four week moving average for the seasonally adjusted Market Index is down 10.5 percent.  The four week moving average is down 2.1 percent for the Purchase Index, while this average is down 12.7 percent for the Refinance Index.
The refinance share of mortgage activity decreased to 72.8 percent of total applications from 83.3 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 2.4 from 1.5 percent of total applications from the previous week.