The volume of refinance applications skyrocketed in the week ending November 28, 2008, according to the Mortgage Bankers Association's (MBA's) ""Weekly Mortgage Applications Survey"":http://www.mbaa.org/NewsandMedia/PressCenter/66599.htm released yesterday. The Refinance Index increased 203.3 percent from the previous week, to 3802.8, MBA said. The association attributed the surge to declining mortgage rates as a result of the ""Federal Reserve's plan"":http://dsnews.comindex.php/home/news_story/2225 to buy mortgage-backed securities (MBS) and debt of the government-sponsored enterprises (GSEs) - Fannie Mae, Freddie Mac, and the 12 Federal Home Loan Banks.
MBA's Market Composite Index, a measure of total mortgage loan application volume, was also up for the week. This index reached 857.7, an increase of 112.1 percent from 404.4 one week earlier. The refinance share of mortgage activity increased to 69.1 percent of total applications from 49.3 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 1.4 percent from 3.0 percent of total applications in the previous week, MBA said.
""Many borrowers missed an opportunity to take advantage when rates dropped sharply for a brief period when the GSEs were placed under conservatorship,"" said Orawin Velz, AVP of Economic Forecasting at MBA. ""When rates plummeted following the Fed's announcement that it would buy GSE debt and MBS, many of those on the sidelines decided to quickly jump in and take advantage of lower rates before they began to rebound.""
According to the MBA's weekly study, the average contract interest rate for 30-year fixed-rate mortgages (FRMs) decreased to 5.47 percent from 5.99 percent. For 15-year FRMs, the average rate dropped to 5.13 percent from 5.78 percent. The average interest rate for one-year ARMs decreased to 6.61 percent from 6.87 percent, MBA said.
Freddie Mac released its ""Primary Mortgage Market Survey"":http://www.freddiemac.com/dlink/html/PMMS/display/PMMSOutputWk.jspxweek=49&ending=20081204 today, which also tracks weekly mortgage rates, and it showed similar declines. For the week ending December 3, 2008, Freddie Mac reported that the 30-year FRM averaged 5.53 percent, down from the prior week when it averaged 5.97 percent. Last year at this time, the 30-year FRM averaged 5.96 percent, according to the GSEs data. The 30-year FRM has not been lower since January 24, 2008, when it was 5.48 percent, Freddie Mac said.
The 15-year FRM this week averaged 5.33 percent, down from the week before when it averaged 5.74 percent, according to Freddie Mac's study. A year ago at this time, the 15-year FRM averaged 5.65 percent, and has not been lower since March 20, 2008, when it was 5.27 percent, the company said.
""After Federal Reserve actions to increase liquidity in the mortgage market, interest rates for fixed-rate mortgages took a dive,"" said Frank Nothaft, Freddie Mac VP and chief economist. ""This week's decline was the largest since the week of November 27, 1981, and 30-year FRM rates are now almost a full percentage point lower since the last week in October, 2008.""