With the number of borrowers willing to refinance having declined significantly, the Mortgage Bankers Association (MBA) Refinancing Index has dropped to reflect this phenomenon.
The MBA reported this morning that for the eighth straight week the Refi Index has declined. The number of refinancings was down to 2169 for the week ending Aug. 22, dropping 21% relative to the previous week’s showing of 2756.8.
“We attribute the decline in the index to burnout,” said a report by Citigroup released this morning. “The pool of borrowers willing to refinance at current relatively high rates which are roughly 120 basis points higher than the levels seen in the middle of June is shrinking with every passing week.”
Citigroup added that over the last two and a half months the Refi Index has plunged so much so that the index is now about 80% below its recent peak. This drop is consistent with the shrinking size of the refinancable mortgage universe — currently 25% of its size in mid-June when mortgage rates bottomed out.
Despite declining from recent peaks, mortgage rates are still 120 basis points to 140 basis points above June lows. Citigroup’s survey of lenders’ Web sites shows that no-point rates currently range from 6.375% to 6.75%. Meanwhile, the spread between primary and secondary market mortgage rates is now approximately 45 basis points, which is 15 basis points below the peak reached in mid-June
Citigroup expects the Freddie Mac Survey Rate released tomorrow, reflecting mortgage rates in effect at the start of the week, to rise to approximately 6.40%.
In terms of the refinancibility of mortgages, Citigroup estimates that about 18% of the 30-year mortgage universe is now refinancible. At the end of last month the percentage of refinancible mortgages was twice as high. Further, just last June, this figure was up to 80%.
Meanwhile, the MBA also reported that the non-seasonally adjusted Purchase Index dropped by 5.7% week over week. The share of refinancings remained at about 45%.