Mortgage Apps Bounce Back despite slightly higher rates

The Mortgage Bankers Association reported this morning that its Composite index of the market, which measures the volume of mortgage loan applications, an increase of 1.9% on a basis-seasonally adjusted during the week ended July 4.   On an unadjusted basis the index declined 19% from the week was completed on 27 June.  Seasonal adjustments compensated for the celebration of Independence Day, which shortened the business week.

The refinance index increased 0.4% from the previous week while the market share of applications for refinancing fell from 53% to 52%.

Refinance Index vs 30 year fixed

Adjusted for seasonal variations in the purchase Index increased by 4% from a week earlier, but the unadjusted index was decrease of 17% and 10% lower than that in the same week in 2013.

Purchase Index vs 30 yr fixed

Both the contractual interest rate and the effective rate for fixed-rate mortgages (FRM) age 30 with consistent balances of $417,000 or less have increased during the week to an average of 4.32% to 4.28%.  Points increased from 0.14 to 0.16.

Version jumbo FRM for 30 years (balance of loans exceeding $ 417,000) 4.26% to 0.06 point fell to 4.24% 0.16 point.  The rate has increased since the previous week.

FRM thirty years backed by FHA saw an increase in the average rate of 3 basis points to 4.02%.  Points is passed to-0.03-0.33 and the effective rate was higher than a week earlier.

The 15-year FRM was the only product where the interest rate eased.  It had a rate of 3.40% average contract and 0.22 point, down 3.42 percent with 0.16 point.  The rate remained unchanged.

Rate mortgages adjustable (weapons) again had a share of 8% of all applications.  The average interest rate of contract for 5/1 arm is passed to 3.24% 3.21%, with points, passing to 0.31 0.33. The rate has increased since the previous period.

MBA data are collected through its weekly mortgage applications survey which has been conducted since 1990.  The survey covers more than 75 percent of all retail mortgage applications in the country.  Respondents include mortgage bankers, commercial banks and thrift.  Interest rates are quoted for loans with a loan-to-value ratio of 80 percent and is home to the departure tax.  Volume indices have a base period and value of March 16, 1990 = 100.

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Mortgage Rates Move Lower, Keeping Range Intact

AppId is over the quota
AppId is over the quota

Mortgage rates improved today.  The bonds that most directly affect rates got a boost from stock market weakness and ongoing European bond market strength.  Today's drop in rates is significant in that it preserves a range that's been intact since early May. 

The range in question is small in terms of rates--stretching only from 4.125% to 4.25%.  Most of the day-to-day movement takes place in the form of closing costs (because lenders tend to offer rates in .125% increments).  So today's most prevalent rate quotes are the same as yesterday's (4.25%), but with slightly lower closing costs.  This drop in closing costs equates to 0.03% in terms of effective rate.

As has so frequently been the case in 2014, any time we're inside a narrow range, borrowers who are inclined to float have more justification in doing so, provided they're ready to lock if rates move back to the higher end of the range.  On a cautionary note, while rates have adhered to this range for 2 months now, the visits to the lowest levels have been progressively higher.  This could indicate that the longer-term momentum is pointing very slightly higher, and we'd need to see a move below late June lows to rule that out.

Loan Originator Perspective

"We are firmly at 4.25% but I still think floating in the short term may be worth it. Just make sure your Lender can lock quickly if it starts to move upward." -Chris Marconi Vice President First Midwest Bank

"With stocks weaker for a second day in a row mortgage rates improved again amidst a quiet week in most respects as far as economic data releases are considered. Recent moves have not taken us out of the persistent range we've been in which tends to support a locking bias for those with short term time horizons. For those with longer time frames, a floating stance with a keen eye to the markets and your loan officer on speed dial may be in order." -Hugh W. Page, Sen. Mortgage Consultant, Capital Partners Mortgage

"I have favored floating since last Wednesday for everyone that missed locking before the payrolls data. If you followed that advice, todays pricing is the best we have seen since Tuesday. Weak data out of Europe and continued issues around the world(Ukraine, Iraq and now Israel) have all contributed to the improvements we saw today. If your lender reprices for the better today, and you are within 15 days of funding, you should consider locking. I think everyone else should continue to float if you can tolerate the risk." -Victor Burek, Open Mortgage

"Nice gains today, as rates continued to return to July 1st's lower levels.. There may be further room for improvement in store, as treasuries have outgained MBS the last few days. As of mid day, 4 lenders repriced better, with more likely on the way. Short term, floating looks like the play. Longer term trends still TBD, stay tuned." -Ted Rood, Senior Mortgage Planner, tedroodteam.com

"The range appears to have found its support at the high end and floating the last 2 days, has paid small dividends. Tomorrow there is the 10 yr Treasury Auction and a good auction could lead to further gains. A good auction is no guarantee, but I think rates being near their highs for the last month should make it attractive. Floating continues to be a good option." -Brent Borcherding, www.brentborcherding.com

Today's Best-Execution Rates

30YR FIXED - 4.25%
FHA/VA - 3.75%
15 YEAR FIXED -  3.375%
5 YEAR ARMS -  3.0-3.50% depending on the lender

Ongoing Lock/Float Considerations

The hallmark of 2014 so far has been a disconcertingly narrow range in rates.  Too many market participants bet on rates going higher in 2014, and markets have punished that imbalance with a paradoxical move lower. As of June, rates were officially lower year-over-year, but that's due to rates' path higher in 2013.  The current path in 2014 remains sideways.  European markets continue to play a nagging role in the background, generally helping rates in the US remain lower than they otherwise might be.  From a wider point of view, we're in limbo, waiting for the first significant move away from the narrow range.  A rally into late May stood a chance to act as this break, but rates have since returned to what were previously the lower limits of the 2014 range. As always, please keep in mind that the rates discussed generally refer to what we've termed 'best-execution' (that is, the most frequently quoted, conforming, 30yr fixed rate for top tier borrowers, based not only on the outright price, but also 'bang-for-the-buck.'  Generally speaking, our best-execution rate tends to connote no origination or discount points--though this can vary--and tends to predict Freddie Mac's weekly survey with high accuracy.  It's safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie's once-a-week polling method).  Chief Operating Officer, Mortgage News Daily / MBS Live A former originator, Matthew began writing for Mortgage News Daily in 2007, covering a wide range of topics. Seeing a need in the marketplace, his focus increasingly shifted toward relating MBS and broader financial markets for loan originators. ... more