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Refinances Drive Down Mortgage Applications

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Weekly applications for residential loans recently turned lower, and it was applications for mortgage refinance transactions that drove down overall activity.

As represented by the Market Composite Index, new applications for residential loans in the week ended Aug. 19 dipped 2 percent from a week earlier.

The index, which is seasonally adjusted, retreated 3 percent with no adjustments made for seasonal factors compared to the week that ended on Aug. 12.

The Mortgage Bankers Association reports the index as part of its
Weekly Mortgage Applications Survey, which it says covers more than three-quarters of  all U.S. retail residential mortgage applications.

Refinance activity slowed a seasonally adjusted 3 percent compared to the previous report. At the same time, refinance share thinned to 62.4 percent from 62.6 percent the prior week. But refinance share was wider than 55.3 percent a year prior.

Applications for purchase financing were mostly unchanged from the previous week. But without any seasonal adjustments, purchase business dipped 2 percent from the last report and climbed 8 percent from the report from the week ended Aug. 21, 2015.

Applications for mortgages insured by the Federal Housing Administration represented 8.9 percent of total applications. FHA share fell from 9.6 percent the previous week and 13.1 percent the same week the previous year.

The share of applications that were for loans guaranteed by the Department of Veterans Affairs fell to 12.4 percent from 13.2 percent
but widened from 11.4 percent the same week in 2015.

Based on MBA’s data, interest rates on jumbo mortgages were 5 basis points less than conforming rates. The jumbo-conforming spread widened from a negative 4 BPS in the report from seven days prior but thinned from a negative 8 BPS twelve months prior.

Adjustable-rate mortgage applications accounted for 4.6 percent of
overall activity. While ARM share didn’t budge from the prior week, it was cut from 6.8 percent a year prior.

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