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Sinking Rates Raise this Week’s New Loan Activity

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An early look at this week’s mortgage activity indicates that falling mortgage rates helped boost new mortgage activity, with Federal Housing Administration loans turning in the strongest performance. Refinances were up almost a third from the same week last year, but purchases were down more than a fifth. A strong employment report likely means worse rates ahead.

Loan originators pulled 3 percent more pricing inquiries in the week ended Friday than they did last week based on the U.S. Mortgage Market Index from Mortech Inc. and The index, which came in at 321 this week, provides a snapshot of weekly mortgage activity well ahead of other available data.

Refinance activity was up 4 percent from last week, while purchases eked out a 1 percent gain.

Refinances represented 71 percent of this week’s inquiries, a hair more than last week’s 70 percent. This week’s refinance share reflected a 57 percent rate-term share and a 14 percent cashout share.

FHA business jumped 7 percent — the best-performing category tracked in the report. Conventional business was 2 percent higher.

But adjustable-rate mortgage activity fell 6 percent. ARM share slipped to 4.94 percent from 5.48 percent seven days earlier.

The Mortgage Market Index was up 8 percent over the week ended Oct. 6, 2010.

While the refinance index has risen 30 percent from a year ago, the purchase index has fallen 23 percent. Total refinance share was just 59 percent a year earlier.

The average U.S. loan amount in today’s report was $221,341, higher than $214,657 a year ago.

Behind this week’s improvement in new business were mortgage rates, with the conforming 30-year mortgage improving to 4.10 percent from an average of 4.14 percent last week. The 30 year was 4.26 percent during the same week in 2010.

Jumbo borrowers paid 74 basis points more than conforming borrowers this week. The jumbo-conforming spread was 70 BPS a week earlier and 92 BPS a year earlier.

Borrowers who opted for a 15-year mortgage had an average rate that was 59 BPS better than 30-year borrowers — not as good as the 68-basis-point advantage they had last week. The spread between 15- and 30-year loans was 57 BPS a year ago.

Mortgage rates look like they will come in higher in next week’s report based on the benchmark 10-year Treasury note yield. The 10-year yield started the week out at an amazingly low 1.80 percent, according to Treasury Department data. But the yield jumped to 2.10 percent today following a better-than-expected employment report.

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