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Purchase Business Persists Despite Holiday Week

Even a holiday week wasn’t enough to slow down home purchase financing — which increased for the third consecutive week. But refinance business was a different story. Rising mortgage rates moved above 4 percent for the first time in more than a year and are likely to be even higher in the next report.

Reflecting weakness from the Memorial Day holiday, the average number of pricing inquiries per loan originator fell 5 percent from last week. That put the U.S. Mortgage Market Index from LoanSifter and Mortgage Daily for the week ended May 31 at 251.

Still, LoanSifter users pulled more pricing inquiries than they did during the same week last year, with year-over-year activity rising 4 percent compared to the revised level a year earlier.

The biggest increase from the week ended May 24 was with adjustable-rate mortgages, with pricing inquiries for ARMs up 7 percent. ARM activity, however, has tumbled 28 percent from a year earlier.

ARM share rose to 5.1 percent from last week’s 4.5 percent but has diminished from 7.4 percent at the same point in 2012.

Purchase financing business climbed 6 percent from the previous report and has ascended 37 percent from the week ended June 1, 2012. The purchase category had a bigger impact on the Mortgage Market Index than ARMs given its 40 percent share in the latest report.

A 4 percent rise was recorded for Federal Housing Administration activity compared to a week earlier, while the gain was 9 percent compared to a year earlier. FHA share increased to 16.8 percent from 15.3 percent and was 16.0 percent one year prior.

But conventional business slumped 7 percent on a week-over-week basis and slowed less than a percent on a year-over-year basis.

Also lower were pricing inquiries for jumbo mortgages, which declined 8 percent from last week. Jumbo activity, however, was up a percent from 12 months prior. Jumbo share slipped to 5.1 percent from 5.2 percent in the previous report and in the same week during the previous year.

The drop from the prior week reflected deteriorating jumbo pricing, which came in 30 basis points higher than conforming pricing. The jumbo-conforming spread widened from 26 BPS last week, though it was better than 45 BPS a year ago.

Refinance pricing inquiries delivered the worst performance, slowing 11 percent from seven days earlier. A 10 percent decline was recorded from the year-earlier week.

Refinance share fell to 60.4 percent from 64.5 percent in the previous report and 69.9 percent 12 months prior. This week’s share was comprised of a 47.0 percent rate-term share and a 13.4 percent cashout share.

Thirty-year fixed-rate mortgages averaged 4.088 percent in the latest report, up from the previous week’s 3.910 percent and 3.908 percent 52 weeks earlier. It was the first time 30-year rates were above 4 percent since the week ended May 4, 2012, when they stood at 4.005 percent.

Rising rates can prompt prospective refinance borrowers to get off the fence and lock their rates before they move even higher — likely keeping the latest week’s activity from deteriorating even more.

The discount for a 15-year mortgage inched up to 78 BPS from 77 BPS. The spread between 15- and 30-year mortgages worsened from 72 BPS in the year-earlier report.

Mortgage rates could be even worse by the time the next Mortgage Market Index report rolls around based on a Mortgage Daily analysis of this week’s Treasury market activity.

The yield on the 10-year Treasury note averaged 2.12 percent during the week encompassed by the latest report, according to data reported by the Treasury Department. The 10-year yield closed out this week at 2.16 percent — suggesting a 4-basis-point increase in the next report.

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