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ARM Business Slows as Fixed Rates Retreat

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New mortgage business mostly held up this week, though a decline was noted for adjustable-rate mortgages as fixed interest rates eased. Purchase financing also slowed.

A 1 percent decline from last week left the U.S. Mortgage Market Index from LoanSifter and Mortgage Daily for the week ended Aug. 30 at 191.

The index, which is reflective of average pricing inquiries per LoanSifter user, was down 22 percent from the same week last year. Year-earlier numbers were revised to reflect data from the same provider.

The biggest drop came from ARMs, which saw 9 percent fewer pricing inquiries than in the week ended Aug. 23. ARM share, meanwhile, fell to 9.9 percent from 10.7 percent a week earlier but was more than double the 4.2 percent a year earlier.

Also slowing were inquiries for purchase financing, with activity off 4 percent for the week. However, purchase business remains up more than half from the week ended Aug. 31, 2012.

Next was Federal Housing Administration-insured activity, which dipped 3 percent from the previous report and was down nearly a quarter from the same week in 2012. FHA share slipped to 16.1 percent from 16.5 percent and was 16.6 percent at the same point last year.

After that were jumbo mortgage inquiries, which retreated 2 percent from last week. But jumbo business was up by more than a third from one year ago. Jumbo share was unchanged at 7.4 percent, though it was stronger than the 4.2 percent from a year prior.

Jumbo mortgages were priced at a 26-basis-point premium over conforming loans, not much different than the 25-basis-point jumbo-conforming spread in place in the last report but less than half the 52-basis-point spread during the same week last year.

Conventional mortgage business drifted 1 percent lower for the week and was down 28 percent from a year earlier.

The only category to log a week-over-week gain was refinance activity, with inquires up 2 percent. But refinances have slowed by nearly half from this week in 2012.

Refinance share edged up to 47.9 percent from 46.5 percent but has plummeted from 73.3 percent one year previous. The latest share included a 33.9 percent rate-term share and a 14.0 percent cashout share.

Interest rates on conforming 30-year fixed-rate mortgages fell to 4.759 percent from 4.839 percent seven days earlier. A year ago, 30-year loans were priced at 3.783 percent.

A 94-basis-point discount for 15-year mortgages wasn’t quite as good as 96 BPS last week. But it was better than this week last year, when 15-year borrowers had rates that were just 65 BPS better than 30-year borrowers.

Mortgage rates aren’t likely to be much different in next week’s Mortgage Market Index report based on this week’s Treasury market activity.

Data from the Department of the Treasury indicate that the 10-year Treasury yield averaged 2.76 percent this week, while it closed at 2.78 percent on Friday.

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