Despite mortgage rates in and around record lows, mortgage application activity was relatively unresponsive for the week ending Sept. 16.

According to the Mortgage Bankers Association (MBA), mortgage applications increased just 0.6% with the Refinance Index up 2.2% and the Purchase Index down 4.7%. 

As a percent of total applications, refinance share increased to 78.3% from 77.3%, while ARM slipped to 6.7% from 6.9%.

This survey captured the increased 75% of all U.S. retail and consumer direct mortgage applications compared to 50% previously. MBA stated in its press release that it tracked the old sample with the new since Jan. 14 to make sure it was comparable with the historical data and found a high correlation. As a result, MBA felt that a restatement of the historical data was notnecessary.

The average contract interest rate for conforming 30-year fixed rate loans was unchanged at 4.29%, said the MBA. The expanded report now includes Jumbo rates, Federal Housing Administration (FHA) rates and 5/1 hybrid ARM rates.

The rate for Jumbo loans was 4.55%, two basis points lower from the previous week, rates for FHA loans slipped one basis point to 4.07%, and 5/1 hybrid ARMs declined three basis points to 2.96. Points were slightly higher for all from the prior week which resulted in a small increase in the effective mortgage rate.

Based on the smaller coverage, it appears the Refi Index could be understating upcoming speeds.  Bank of America Merrill Lynch analysts warned in research this week that cuspy coupons, particularly 30-year 4.5s and 15-year 4s and 4.5s, are likely to surprise to the upside.

The current outlook for speeds in September is for around a 10% increase overall with CPRs on 4s through moderately seasoned 5s increasing between 30% and 50%.  Meanwhile, credit impaired coupons are projected mostly slower. 

Currently, speeds are expected to peak in October, which will be reported in November, at less than 5% higher than September's estimates.

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