Mortgage application activity tumbled 10% in the week ending Nov.11, said the Mortgage Bankers Association (MBA), despite mortgage rates holding steady.
The Refinance Index gave back slightly more than the prior week's gain, dropping 12.2% to 3483.9. Meanwhile, the Purchase Index slipped 2.2% to 179.0. The results were adjusted for the Veterans' Day holiday.
According to their survey, the average contract interest rate for 30-year fixed rate conforming loans rose one basis point to 4.23%, The Federal Housing Administration loan rates were also up a basis point to 4.03%, while Jumbo rates declined to 4.56% from 4.57%.
It appears that to stimulate refinance activity, mortgage rates need to drop low enough to allow borrowers underlying the 4.0% coupon to refinance. Meanwhile, activity associated with HARP 2.0 should start showing up in early December as lenders solicit borrowers with LTVs greater than 80%.
As a percent of total applications, refi share declined to 77.3% from 78.6%, while ARM share increased to 6.1% from 5.8%.
The MBA also reported that for the month of October, 50.6% of refi applications were for 30-year fixed rate loans, 28.8% for 15-year fixed and 6.0% for ARMs. They added that 15-year share was at its second highest point since the index was re-benchmarked in January 2011.
Yesterday afternoon, Freddie Mac released its Quarterly Product Transition Report for the third quarter. The GSE also noted the increased refinancings into shorter term fixed mortgages. In 3Q11, 40% moved from a 30-year fixed rate into either a 15- or 20-year fixed, up from 36% in 2Q11 and 33% in 1Q11.
For those who had a hybrid ARM 63% refinanced into a fixed rate up from 54% in 2Q11. Only 37% chose to stay in a hybrid ARM versus 46% in the prior quarter.