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Holiday Activity Tumbles

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Depressed by the Fourth of July holiday, new loan activity plunged by more than a fifth this week. Adjustable-rate and government mortgages were hardest-hit. Rates reached a new low and appear poised to establish another record thanks to dismal employment data.

The average mortgage loan originator pulled 21 percent fewer pricing inquiries during the week ended July 6 than in the prior week, pulling down the U.S. Mortgage Market Index from Mortech Inc. and Mortgage Daily to 172. Had there been five working days this week, however, the index would have been about the same as last week. The Mortgage Market Index was 179 in the week ended July 8, 2011.

Refinance activity fell 21 percent for the week but was up 39 percent on a year-over-year basis. Refinance share slipped to 70.4 percent from 70.6 percent but stands well above 48.6 percent at this point last year. This week’s share reflected a 56.5 percent rate-term share and a 13.9 percent cashout share.

Inquiries for purchase financing dropped 20 percent for the week and were off 45 percent from a year ago.

As fixed rates dove deeper into record territory, fewer borrowers sought out adjustable-rate mortgages, with ARM activity down by a quarter from a week earlier and sinking 70 percent from a year earlier. ARM share inched down to 3.1 percent from last week’s 3.3 percent and sits nowhere near the 9.8 percent level from the same week in 2011.

Federal Housing Administration business tumbled 24 percent from the last report but was only off 13 percent from the year-earlier week. FHA share slipped to 11.1 percent from 11.6 percent a week ago and was also off from a year ago, when it stood at 12.5 percent.

Conventional activity declined 20 percent from last week but was just 3 percent lower than 12 months prior.

Inquiries for jumbo mortgages retreated 23 percent for the week, while jumbo share inched down to 8.3 percent from 8.6 percent. Jumbo mortgage rates were priced at a 70-basis-point premium over conforming rates, a narrower spread than 72 BPS in the previous report but much wider than 43 BPS in the report from a year ago.

Fifteen-year loan borrowers were quoted rates that were 65 BPS better than 30-year borrowers, a little wider margin than 64 BPS in the prior week but nowhere near as good as the 85-basis-point discount in the year-earlier period.

Rates on 30-year fixed-rate mortgages eased to 3.73 percent — the lowest level since the Mortgage Market Index came into existence in 2009 — from 3.77 percent in the previous report. The 30 year was 4.79 percent in the same week last year.

By the time the next Mortgage Market Index report rolls around, mortgage rates are likely to be around 7 BPS better based on Treasury market activity. The yield on the 10-year Treasury note averaged 1.64 percent during the week covered by this report, while the 10-year yield closed at just 1.57 percent today, according to data from the Department of the Treasury. The decline was the result of another weak employment report released Friday.

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