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Refis Rise Again Despite Purchase Slump

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Fewer homebuyers sought financing for a home purchase, and purchase demand was down more than a quarter from last year. But consumers out shopping for a refinance were more active for the second week in a row, helping to lift overall activity.

Climbing 7 percent from last week, the U.S. Mortgage Market Index from Mortech Inc. and MortgageDaily.com for the week ended Dec. 9 landed at 247. The index, which reflects pricing inquiries by loan originators, was off 5 percent from the same week last year.

Behind the weekly improvement were refinances, climbing 12 percent over the past seven days. Refinances were even 13 percent stronger than the year-earlier week. Refinance share rose to 67 percent from last week’s 64 percent and from 56 percent in the week ended Dec. 8.

Inquiries for adjustable-rate mortgages were up 11 percent, with ARM share rising to 6.16 percent from last week’s 5.94 percent.

Conventional business improved 8 percent since the previous report, and government inquiries increased 2 percent. The share of total activity for loans insured by the Federal Housing Administration was 11.02 percent, deflating from 11.54 percent.

Home purchase financing was the only category to slow. Inquiries for purchase loans fell 2 percent from last week and were down 28 percent from this week last year.

Refinances strengthened as the conforming 30-year mortgage averaged 4.13 percent this week, falling from 4.22 percent a week prior. The 30 year was 4.68 percent at this point in 2010.

Mortgage rates could edge higher in next week’s report. Based on an analysis of the 10-year Treasury yield this week reported by the Department of the Treasury, interest rates are likely to come in around 3 BPS higher. The 10-year Treasury yielded 2.07 percent as of today’s market closing, versus the 2.04 percent average for the entire week.

The discount for a 15-year loan was 68 basis points this week, a bigger discount than last week’s 64 BPS.

Jumbo borrowers paid a 69-basis-point premium over conforming borrowers this week. The jumbo-conforming spread was less at 66 BPS last week but much higher at 75 BPS a year ago.

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