Mortgage application activity declined 6.7% for the week ending April 8 as mortgage rates inched higher. 

According to the Mortgage Bankers Association, the Refinance Index fell 7.7% to ~1924. This is the lowest refinance activity has been since mid-February and the second lowest for the year.

Since mortgage rates hit a near-term low of 4.76% in mid-March, the Refinance Index has fallen 22% as 30-year 4.5% coupons and lower are out of the refinance window, as are most 5% coupons.

As a percent of total applications, the refinance share was 60.3%, down from 61.2% — the lowest the share has been since early May 2010.

Meanwhile, the Purchase Index declined 4.7% to ~192, losing 95% of the prior week's gain. The increase in purchase activity in the prior report resulted from a jump in government loans before the increase in Federal Housing Administration mortgage insurance premiums was effective April 1.

The average contract interest rate for 30-year fixed rate loans increased for the fourth straight week to 4.98% from 4.93%. Points increased as well to 0.93 from 0.69 for 80% LTV loans thus increasing the effective rate.

Unless mortgage rates drop significantly, prepayment activity looks to stay benign as most credit-eligible borrowers are outside of the refinancing window and credit conditions remain very tight for other borrowers with Home Affordable Refinance Program the most likely avenue for refinancing.

The current outlook for speeds in the May and June reports (released in early June and July, respectively), are for speeds to be flat to less than 5% higher on average. This is based on the number of collection days increasing to 21 in June and 23 in July as well as seasonals starting to pick up,  albeit minimal given the weak state of the housing market.

In April, speeds on FHLMC Golds and GNMAs are expected to slow around 2% on average, or 1 CPR, while FNMAs are projected to decline nearly 7% and be spread more or less uniformly on 5s through 6.5s in a reversal from the pickup seen in March. 

The modest increase in the Refinance Index of over 13% on average in March from February in response to an 11 basis point decline on average in 30-year mortgage rates to 4.84% is offset by the decline in the number of collection days to 20 from 23.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.