During the second week since the Federal Reserve lifted rates, mortgage activity was slower than it’s been in at least six years, and adjustable-rate business surged.
The U.S. Mortgage Market Index, an indication of upcoming originations, was 86 for the week ended Jan. 1. There are no adjustments made for seasonal variations.
Published weekly by Mortgage Daily, the Mortgage Market Index is determined based on the average volume of rate locks that are pulled by customers of OpenClose.
While the final week of the year is normally slower, this past week was the slowest week since at least the week ended Dec. 16, 2009, when Mortgage Daily launched the index at a level of 197 utilizing data from Mortech.
The most-recent index was down 22 percent from a week earlier and 23 percent lower than a year earlier.
In the second (mostly) full week of activity since the Federal Open Market Committee raised rates for the first time since 2006, there seemed to be a clear market response.
Rate locks for prospective borrowers who preferred an adjustable-rate mortgage over a fixed-rate loan soared 41 percent from the week ended Dec. 25, 2015. ARM activity was up 81 percent compared to
the same week last year.
Accordingly, ARM share ballooned to 21.3 percent from 11.8 percent in the previous report and 9.1 percent in the year-earlier report.
ARM was the only category to see a gain.
Leading the week-over-week decline was jumbo business, which descended 35 percent and was down by nearly half from the week ended Jan. 2, 2015.
Jumbo share was trimmed to 6.3 percent from 7.5 percent and was also thinner than 9.4 percent one year prior.
The weakening jumbo activity contrasted the jumbo-conforming spread, with jumbo rates coming in 19 basis points lower than conforming rates. The jumbo-conforming spread was wider than a negative 15 BPS the prior week and swung a from a positive 12 BPS a year prior.
Next up were rate locks for refinances, which sank more than a quarter but were off only four percent from the first week of 2015. Refinance share thinned to 69.7 percent from 73.5 percent but was wider than 56.5 percent in the year-earlier report. The latest ARM share was made up of a 44.3 percent rate-term share and a 25.4 percent cashout share.
A 22.5 percent week-over-week decline was recorded for conventional business, while the year-over-year drop was nearly a third.
Purchase financing slowed by 22.1 percent and was off a similar proportion from the same week in 2015.
Rate locks for residential loans to be insured by the Federal Housing Administration slowed by a fifth for the week but were up more than a third from 12 months previous. FHA share was exactly a quarter, up minimally from 24.4 percent in the prior report but significantly wider than 14.4 percent a year prior.
Conforming 30-year fixed rates averaged 4.01 percent, rising five BPS from the last report but 25 BPS better than the year earlier report.
A 77-basis-point discount was
seen by the average 15-year borrower versus 30-year borrowers. Fifteen-year mortgages were priced 74 BPS lower than 30-year loans in the previous week’s report, while the spread was less than 88 BPS in the year-previous report.
According to a Mortgage Daily analysis of recent Treasury market activity, fixed rates on residential loans are unlikely to venture far from their current levels — though they could possibly ease a little.
