U.S. Mortgage Application Volumes Down 3% in Late January

---

According to the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending January 27, mortgage applications decreased 2.9 percent from one week earlier.

The Market Composite Index, a measure of mortgage loan application volume, decreased 2.9 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 9.0 percent compared with the previous week.  The Refinance Index decreased 3.6 percent from the previous week.  The seasonally adjusted Purchase Index decreased 1.7 percent from one week earlier. The unadjusted Purchase Index increased 17.1 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 4.11 percent.  The four week moving average is up 2.48 percent for the seasonally adjusted Purchase Index, while this average is up 4.22 percent for the Refinance Index.

The refinance share of mortgage activity decreased to 80.0 percent of total applications from 81.3 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.6 percent from 5.3 percent of total applications from the previous week.

"The Federal Reserve surprised the market last week by indicating that short-term rates were likely to stay at their current low-levels until the end of 2014.  Longer-term treasury rates dropped in response, and mortgage rates for the week were down slightly as a result," said Michael Fratantoni, MBA's Vice President of Research and Economics. Fratantoni continued, "Although total application volume dropped on an adjusted basis relative to last week, refinance volume remains high, with survey participants reporting that the expanded Home Affordable Refinance Program (HARP) contributed to roughly 10 percent of their refinance activity."

In December 2011, Connecticut had the largest increase in refinance applications, increasing by 80.1 percent from November. Maine saw a 30.8 percent increase in applications for home purchase, which was the largest state-increase in applications for home purchase. Only 12 states had a decrease in home purchase activity in December, while every state in the US saw an increase in refinance volume.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.09 percent from 4.11 percent, with points decreasing to 0.41 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 with jumbo loan balances (greater than $417,500) decreased to 4.33 percent from 4.39 percent, with points increasing to 0.41 from 0.40 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.  This is the lowest 30-year jumbo rate since MBA started tracking the series in January 2011.  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 3.96percent from 3.97 percent, with points increasing to .61 from 0.57 (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 3.36 percent from 3.40 percent, with points increasing to 0.41 from 0.40 (including the origination fee) for 80 percent LTV loans. The effective rate alsodecreased from last week.

The average contract interest rate for 5/1 ARMs increased to 2.94 percent from 2.91 percent, with pointsdecreasing to 0.39 from 0.41 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.  The effective rate also increased from last week.