Refi Index rises unexpectedly

The Mortgage Bankers Association (MBA) reported this morning that for the week ending Sept. 5, the Refinancing Index rose by 16% to 2307 (without adjusting for Labor Day). On a holiday-adjusted basis, the Refi Index increased 45.5% to 2883.6 from 1981.5 the previous week.

“The rise in the index is somewhat surprising given that average mortgage rates were practically unchanged week over week,” said Citigroup Capital Markets in a report released this morning. The report also said that there may be several reasons for the rise in the Index.

One factor is the rate rally at the end of the previous week, which might have had a disproportionately strong effect on refinancing activity, said Citigroup. Aside from this, the Refi Index had dropped for seven consecutive weeks. The firm said that this week’s rise may just reflect week-to-week volatility. Also, the average loan size for conventional refinancings dropped to $159,000 from $187,000 a week ago. Analysts suggest this week’s resurgence in the refinancing activity was caused by lender solicitation targeting more seasoned loans.

Citigroup’s survey of lenders’ Web sites showed that no-point rates currently vary between 6% and 6.5%. Mortgage rates are now back to the levels at the start of August .The Freddie Mac Survey Rate that is going to be released tomorrow -- which reflects mortgage rates in effect at the start of the week -- is expected the to be at roughly 6.15%.

Meanwhile, the MBA Purchase Index rose by 16% week-over-week on a non-seasonally adjusted basis, registering a 3% increase after a seasonal adjustment. The MBA Total Market Index dropped by roughly 3%. The share of refinancings rose to 48.6% compared to just 43% a week ago.