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Home Purchase Financing Jumps, ARM Activity Surges

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Rapidly rising rates weren’t enough to hold back a jump in new home purchase financing activity. But the rate increase did drive more prospective borrowers into adjustable-rate products.

Loan pricing inquiries were up 7 percent this week, pushing the U.S. Mortgage Market Index from LoanSifter and Mortgage Daily for the week ended June 28 to 293. New mortgage business was also better than the same week last year, with activity increasing 15 percent.

The week’s best performance was delivered by adjustable-rate mortgage inquiries, which shot up a third from last week and were 27 percent better than the week ended June 29, 2012.

As mortgage rates leapt higher, more borrowers flocked to ARMs in an attempt to grab quickly diminishing low interest rates. ARM share widened to 8.1 percent from 6.5 percent and was even broader than the 7.4 percent share in the same week last year.

Inquiries for home purchase financing jumped 17 percent from the week ended June 21 and have ascended by two-thirds compared to a year earlier.

Jumbo mortgage activity got a lift this week, increasing 9 percent from seven days prior. Jumbo business was up nearly a third from 12 months prior.

More than 5.5 percent of weekly business was jumbo, marginally wider than in the previous report and up from the 4.8 percent jumbo share in the same report during the previous year.

Jumbo mortgage rates rose more than conforming rates, pushing the spread between jumbo and conforming loans to 35 basis points from the prior week’s 28 BPS. But jumbo pricing remains more competitive than one year earlier, when it stood at 51 BPS.

Conventional business improved 7 percent over the past seven days, while the year-over-year improvement was 14 percent.

A 7 percent rise was recorded for pricing inquiries on loans insured by the Federal Housing Administration. FHA activity was up 5 percent from the same week in 2012.

FHA share slipped to 15.6 percent from 15.7 percent and was down from 17.1 percent at the same point last year.

Inquiries for refinances were up less than a percent from last week and have fallen 7 percent on a year-over-year basis.

Refinance share was cut to 56.5 percent from 60.1 percent a week earlier and 69.8 percent a year earlier. The latest share reflected a 40.9 percent rate-term share and a 15.6 percent cashout share.

Conforming 30-year fixed rates bolted to 4.638 percent — the highest level since the week ended July 22, 2011, when the 30 year averaged 4.699 percent.

Thirty-year mortgages averaged 4.303 percent in the previous report and 3.871 percent in the report for a year prior.

An 87-basis-point discount was awarded to 15-year borrowers in the latest report, improving from a spread of 83 BPS in last week’s report. The spread between 15- and 30-year loans was just 65 BPS in the same week during 2012.

Mortgage rates aren’t likely to be much different in the next Mortgage Market Index report based on a Mortgage Daily analysis of Treasury market activity.

The yield on the 10-year Treasury note, a benchmark for mortgage rates, averaged 2.55 percent during the week covered by the index, while the 10-year yield closed at 2.52 percent on Friday, according to data reported by the Treasury Department.

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