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Refinances Rise Despite Rising Rates

A surge in conventional refinance activity helped push up overall activity to the highest level in more than a year-and-a-half despite deteriorating interest rates.

A 24 percent increase from last week left the U.S. Mortgage Market Index from LoanSifter and Mortgage Daily for the week ended June 7 at 313.

The last time that the Mortgage Market Index was this high was the week ended Oct. 7, 2011, when it came in at 321.

In the same week last year, the index was 306.

Pricing inquiries for adjustable-rate mortgages shot up 38 percent from the week ended May 31 — the biggest increase of any category. But ARM activity was off more than a quarter from a year earlier.

ARM share widened to 5.7 percent from 5.1 percent but was more narrow than 7.9 percent in the week ended June 8, 2012.

With a 30 percent increase, refinance business was the second-strongest category. Refinances benefited from a robust 47 percent rise in cashout activity. Overall refinance activity has retreated 7 percent, however, compared to a year earlier.

Refinance share rose to 63.3 percent from the previous week’s 60.4 percent. Refinance share was slimmer than 70.0 percent during the same week in 2012. This week’s share consisted of a 47.3 percent rate-term share and a 16.0 percent cashout share.

With a more than one quarter gain over the prior report, conventional activity was the third-biggest gainer. Conventional business was 1 percent better that at the same point last year.

Pricing inquiries were up 18 percent on a week-over-week basis for jumbo loans, while year-over-year activity was off 3 percent. Jumbo share slipped to 4.8 percent from 5.1 percent a week earlier and a year earlier.

The premium for a jumbo mortgage was unchanged from the last report at 30 basis points, thought the jumbo-conforming spread has tumbled from 46 BPS a year ago.

Purchase financing maintained strength, increasing 15 percent from the previous report. Purchase business was up a quarter from the same week a year prior.

The smallest week-over-week gain was with loans insured by the Federal Housing Administration: 7 percent. FHA business has retreated 13 percent from one year prior.

FHA share fell to 14.5 percent from the previous week’s 16.8 percent and 17.1 percent in the same week during the previous year.

The 30-year fixed-rate mortgage averaged 4.180 percent in the latest report, rising from 4.088 percent seven days earlier. The 30 year averaged 3.895 percent one year prior.

Fifteen-year mortgages were priced at an 81-basis-point discount to their 30-year counterparts, better than the 78-basis-point spread last week and 70-basis-point spread at the same point last year.

Treasury market activity is pointing towards higher mortgage rates in the next report.

During the week of the latest Mortgage Market Index report, the yield on the 10-year Treasury note averaged 2.12 percent, according to Treasury Department Data.

But the 10-year yield climbed to 2.17 percent Friday thanks to a better-than-expected employment report — suggesting around a 5-basis-point increase ahead for mortgage rates.

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