Refinance Demand Strong at Year’s End

By:: Peter King | January 04, 2012

Mortgage demand fell over the two-week holiday period, even when accounting for the usual slowdown brought on by the holiday season.

Overall, newly submitted mortgage applications for the week ending Dec. 30 were down a seasonally adjusted 3.7 percent from the week ending Dec. 16, according to figures released this morning by the Mortgage Bankers Association (MBA).

Even so, demand was up strongly compared to last year, with applications up 39 percent compared to the two-week period at the end of 2010.

Mortgage refinancing relatively steady

For the current period, applications for mortgages to purchase homes showed the biggest decline, with purchase applications down a seasonally adjusted 9.7 percent over the past two weeks. Refinance applications were down only 1.9 percent over the same period and made up 81.9 percent of the total, the highest share it represented all year.

Meanwhile, MBA economist Michael Fratantoni said the organization does not expect that increased mortgage fees included in legislation to extend the payroll tax reduction will begin to show up in higher mortgage rates until at least February.

Lowest 30-year mortgage rates of the year

For the last two weeks of 2011, average interest rates on 30-year fixed-rate mortgages fell to 4.07 percent, with 0.53 points paid (including origination fees), the lowest level reported all year by the MBA. Interest rates on 30-year jumbo loans above $417,500 were 4.41 percent with 0.47 points. Thirty-year FHA mortgage rates averaged 3.96 percent with 0.71 points paid.

For 15-year fixed-rate mortgages, the average was 3.37 percent with 0.50 points, while initial rates on five-year adjustable rate mortgages (ARMs) were at 2.98 percent with 0.48 points. All figures are for mortgages with an 80 percent loan-to-value ratio, equal to a 20 percent down payment on purchases.

The MBA rate and application survey covers 75 percent of all U.S. mortgage applications and is typically conducted weekly, except for during the year-end holiday season.

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