The Mortgage Bankers Association (MBA) reported this morning that the Refinancing Index dropped 9% to 1981.5 (for the week ending August 29, 2003) from 2169 the week prior.

According to Citigroup Capital Markets research released this morning, this is the first time since July 2002 that the Index dropped to the sub-2000 level. Citigroup attributed the decrease to several factors. Aside from mortgage rates increasing slightly week-over-week, burnout is also an factor. Analysts said that the pool of borrowers willing to refinance at today’s relatively high rates (about 120 basis points more than those seen in mid-June) is shrinking. Citigroup also cited the impact of the Labor Day weekend, with many consumers beginning the long weekend early.

Citigroup noted that rates rose slightly over the past week. According to the bank's survey of lender Web sites, no-point rates range between 6.25% and 6.75%. This puts primary market rates about 120 basis points and secondary market rates at about 150 basis points over the record-low levels seen in June. Meanwhile, the spread between primary and secondary market mortgage rates is still at approximately 45 basis points, remaining about 15 basis points below its peak reached in mid-June .

The firm also predicted that the Freddie Mac Survey Rate, due to come out tomorrow, to be at roughly 6.30%. Analysts also estimate that about 20% of the 30-year mortgage universe is now refinancible at current rates. In contrast, this number was around 80% in June.

Meanwhile, the non-seasonally adjusted MBA Purchase Index increased by 3% week-over-week while the MBA Total Market Index dropped by about 3%. The refinancing share was at 43%.

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