A decline in new mortgage business this week was led by adjustable-rate mortgages. Meanwhile, the spread between conforming and jumbo mortgages widened by 8 basis points. But pricing on 15-year loans became more competitive — though the outlook is for a big bump in fixed rates in the next report.
At 186, the U.S. Mortgage Market Index from LoanSifter and Mortgage Daily for the week ended Aug. 16 was down 3 percent from last week and 20 percent lower than the same week in 2012. The index reflects average pricing inquiries of LoanSifter originator clients.
The biggest week-over-week decline was suffered by ARMs, with activity slowing 7 percent from the week ended Aug. 7. Still, inquiries for ARMs were up 86 percent from the same week in 2012 — the best year-over-year performance.
ARM share slipped to 9.7 percent from 10.1 percent in the previous report. ARM share was more than double, however, the 4.2 percent level one year prior.
Next were inquiries for conventional mortgages, which declined 4 percent and were down more than a quarter from the same week last year.
Purchase financing fell 3.3 percent from last week. But, as was the case with ARMs, purchase activity was substantially higher than in the week ended Aug. 17, 2012, with year-over-year performance improving 54 percent.
After that was refinance business, which slowed 3.1 percent and has plummeted 47 percent over the past year. Refinance share was barely changed at 49.1 percent versus 49.0 percent seven days earlier. But refinance share was much thinner than the 73.7 percent 12 months earlier. This week’s share consisted of a 36.1 percent rate-term share and a 13.0 percent cashout share.
Pricing inquiries for loans insured by the Federal Housing Administration drifted down less than 3 percent and have retreated 31 percent from a year ago. FHA share inched up to 15.4 percent from 15.3 percent but fell from 17.8 percent during the same week last year.
This week’s best performance was delivered by the jumbo category, with pricing inquiries off less than one percent. Jumbo business has surged 72 percent from a year ago. Jumbo share rose to 8.5 percent from 8.3 percent and has soared from 3.9 percent at the same point in 2012.
The solid performance with jumbo loans came despite that the jumbo-conforming spread widened to 37 BPS from 29 BPS. Still, the spread is much thinner than 50 BPS a year ago.
Thirty-year fixed-rate conforming loans averaged 4.662 percent, a little worse than 4.640 percent in the previous report. The 30 year was just 3.854 percent in the year-earlier report.
Fifteen-year loans became much more attractive this week, with borrowers being quoted rates that were 93 BPS better than on 30-year loans compared to the 90-basis-point spread in the prior week and the 65-basis-point spread in place a year prior.
It doesn’t look good for upcoming mortgage rates based on an analysis of this week’s Treasury market activity.
Data from the Treasury Department indicate that the 10-year Treasury yield — a benchmark for 30-year mortgage rates — averaged 2.73 percent this week, while the 10-year yield closed at 2.84 percent Friday. The rise suggests rates could be around 11 BPS worse in the next report.