Refinance Applications in U.S. Surge as Rates Drop in December

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According to the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending December 9, mortgage applications increased 4.1 percent from one week earlier, driven by a surge in refinance applications.

The Market Composite Index, a measure of mortgage loan application volume, increased 4.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 4.2 percent compared with the previous week. The Refinance Index increased 9.3 percent from the previous week to its highest level since November 4, 2011. The seasonally adjusted Purchase Index decreased 8.2 percent from one week earlier. The unadjusted Purchase Index decreased 11.8 percent compared with the previous week and was 4.3 percent lower than the same week one year ago.

The four week moving average for the seasonally adjusted Market Index is up 0.65 percent. The four week moving average is up 1.55 percent for the seasonally adjusted Purchase Index, while this average is up 0.69 percent for the Refinance Index.

The refinance share of mortgage activity increased to 79.7 percent of total applications from 76.0 percent the previous week. This is the highest refinance share since this year. The adjustable-rate mortgage (ARM) share of activity decreased to 5.6 percent from 5.7 percent of total applications from the previous week.

For the month of November, purchase applications decreased in all loan categories except for loan amounts greater than $729,000 which saw a 1.9 percent increase in applications from last month. Loans that were $150,000 or less had 10.7 percent fewer applications over the month, while applications for loans between $150,000 and $300,000 decreased 8.9 percent, and applications for loans between $300,000 and $417,000 decreased 8.6 percent. Of the higher balance loans, the category for loans between $417,000 and $625,000 had a 6.0 percent decrease in applications and the number of applications for loans between $625,000 and $729,000 decreased 5.2 percent over the month.

However, compared to the same month last year, the largest decrease in applications was for the $625,000 and $729,000 loan category, which fell 20.2 percent. Applications for loans between $150,000 and $300,000 and those between $300,000 to $417,000 dropped by 1.2 percent and 9.8 percent, respectively. Gaining the most from last year were applications for loan amounts $150,000 or less, which rose 9.8 percent, while applications for loans greater than $729,000 increased by 5.1 percent. The $417,000 to $625,000 category grew 0.6 percent.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.12 percent, the lowest rate this year, from 4.18 percent, with points decreasing to 0.45 from 0.48 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500)decreased to 4.47 percent, the lowest rate this year, from 4.52 percent, with points decreasing to 0.45 from 0.47 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA  decreased to 3.94 percent, the lowest rate this year, from 3.98 percent, with points increasing to 0.68 from 0.52 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also increased from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.44 percent, the lowest rate this year, from 3.53 percent, with points increasing to 0.52 from 0.45 (including the origination fee) for 80 percent LTV loans. The effective rate also decreased from last week.

The average contract interest rate for 5/1 ARMs decreased to 2.93 percent, the lowest rate this year, from 3.01 percent, with points decreasing to 0.53 from 0.54 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also decreased from last week.