The rush among purchase-mortgage applicants to get in under the early October deadline for tighter FHA loan standards showed up in the Mortgage Bankers Assn. applications survey for last week as an 8.5% decline in the Purchase Index, the MBA said Wednesday.
Overall applications, spurred by refinancings, rose 14.6% from the previous week on a seasonally adjusted basis as the refinancing index jumped 21%.
Still, the news for the home purchase market was not all bad; though the unadjusted Purchase Index was down 37.1% from the comparable week last year, purchase applications remain above their May low.
Moreover, rates continued to fall last week. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.21% from 4.25%, with points increasing to 1.02 from 1.00 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. It was another new low for the survey. The rate for 15-year fixed-rate mortgages decreased to 3.62% from 3.73%, with points decreasing to 1.06 from 1.14. That also was a new low.The rate for one-year ARMs decreased to 7.03% from 7.11%, with points increasing to 0.27 from 0.24 (including the origination fee) for 80 percent LTV loans.
"After five weeks of steadily declining rates to yet another new low, borrowers who had been on the fence jumped off, which factored into refinance activity surging more than 20 percent," said Michael Fratantoni, MBA's vp/ research and economics. "Refinance application volumes are now close to the highest level this year. Purchase activity remains generally weak, but applications for conventional purchase mortgages are now at their highest level since the beginning of May following the expiration of the tax credit."
He added, "Last week saw a big jump in applications for FHA loans to purchase homes. We surmised that this was due to potential buyers wanting to beat the stricter FHA standards that went into effect October 4th. This conjecture was confirmed by the fact that this week FHA applications fell back to a level closer to the average seen over the past four months."
The four week moving average for the seasonally adjusted Market Index was up 3.0%; for the Purchase Index, it was down 0.3% and for the Refinance Index it was up 3.9%.
The refinance share of mortgage activity increased to 83.1% from 78.9% the previous week and is the highest refinance share since January 2009. The adjustable-rate mortgage (ARM) share of activity decreased to 5.4% from 6.1%.