The Mortgage Bankers Association Refinancing Index dropped by about 20% to 2100 (holiday-adjusted) for the week ending Nov. 28, from 2612 the previous week. Without the adjustment for Thanksgiving, the index declined by 44%.

The dip in the Index is probably due to the increase in mortgage rates seen over the past week, reported Citigroup Global Markets in a report released this morning. Aside from this, the firm said it might also be that the holiday-related slowdown has been more than the MBA 1.5-day adjustment suggests.

Meanwhile, the seasonally adjusted MBA Purchase Index dropped by 3.9 % week over week to 441.8 from 459.9 the prior week.

Citigroup data indicates that the index’s reactivity to changes in mortgage rates has dropped significantly in the past three months. This dip may also be seen as a nearly complete disappearance of the media effect. Another possible cause of the decline in the slope of the trend line is burnout.

In terms of where mortgage rates are, Citigroup said that over the week ending November 28, 2003 mortgage rates backed up. This has led to a rise in weekly average rates of about 10 basis points. As of yesterday, primary mortgage rates varied between 5.875% and 6.375%. The figures are based on Citi’s survey of lenders’ web sites.

Analysts said that the spread between the No-Point Survey Rate and the Base Mortgage Rate has somewhat stabilized in the past few days. It is currently in the vicinity of 30 basis points. The narrowing of the spread since this summer makes it seem that lenders have sufficient capacity to process incoming applications without significant backlog. They are now willing to operate at tighter margins to attract more borrowers.

Citi expects the Freddie Mac Survey Rate — scheduled for release tomorrow and usually reflecting mortgage rates in effect at the start of the week — to rise to about 6.10%.

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