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Mortgage Apps: Slight Rebound as Borrowers Look to ARMs

December 21, 2016

Bottom Line: Mortgage applications rebounded modestly last week, despite the 30-year mortgage rate hitting 4.41%, according to the realtor survey. The share of adjustable rate mortgages rose again, now 6.5% of all mortgages, the highest since early this year, as borrowers look to keep payments low with the 5-year fixed, 30-year amortizing mortgage rate at 3.45% last week, now nearly a full 100bps below the 30-year, fixed-rate. The share of ARMs peaked at about 8.5% in the post-crisis cycle, but was in the 30-35% range in 2004 and 5. Overall the trend in mortgage applications has clearly shifted lower in the last 6 weeks, mostly due to fewer refinance applications, where the 4-week average is now nearly back to the 2014 lows. Purchase applications are still rising on a trend basis but are now less than 1% above year ago levels.

The MBA Mortgage Applications Index ROSE by 2.5% during the week ended December 16 to 407.3, sharply below its 13 week average of 467.9 and 9.5% BELOW its year ago level.

The Purchase Index ROSE by 2.7% to 232.9, modestly above its 13 week average of 220.7 and 0.9% ABOVE its year ago level. The level of purchase activity had stayed quite low after the crisis until 2015 when it started to rise. But that trend has lost momentum since mid-2016.

The Refinance Index ROSE by 3.0% to 1,449. Despite this increase, refinancing activity is sharply below its 13 week average of 1,893 and 17.8% BELOW its year ago level.

Contract Mortgage Rates ROSE with the 30-year fixed rate increasing by 13 bps to 4.41% and with the 15-year fixed rate increasing by 12 bps to 3.64%.

Article by Contingent Macro Advisors