Purchase Apps at All-Time High as Rates Fall

In its Weekly Mortgage Application Survey, the Mortgage Bankers Association of America (MBA) reported that the Purchase Index reached a record high — increasing 12.5% from the prior week to 501.6.

MBA said the Market Composite Index — which includes purchases and refinances — jumped 30.4% from the previous week to end at 916.1. The index was reported at 1100.3 a year ago.

The Refinance Index increased 51.5% to 3327.3, the highest week to week increase since Jan. 12, 2001, MBA reported, but a far cry from the 9977.8 record level reached last June.

Meanwhile, the refinance share of applications increased to 57.7% from 51.6% the prior week, said MBA.

However, refinance applications are likely to take less of the share over the next three years. According to the group’s macroeconomic and housing finance outlook, the purchase loan share is expected to increase annually, while the share of refinance loan originations (at 66% in 2003) is anticipated to decline to 34%, 22% and 19%, in 2004, 2005 and 2006, respectively.

Freddie Mac said all rates stand at the lowest levels since July, beginning with the 30-year fixed-rate mortgage — which came in at 5.64% in this week’s Primary Mortgage Market Survey. The average last week was 5.66%, while a year ago it was 5.91%.

The 15-year average also decreased by 2 basis points (BPS) from the previous week to 4.95%, said the government sponsored enterprise.

Down 6 BPS, the 1-year Treasury-indexed adjustable-rate mortgage (ARM) came in at 3.56%, according to Freddie. Meanwhile, the MBA said the share of ARM applications edged up to 27.8%.

Bankrate.com’s surveyed panel of industry experts say that if rates change within the next 30 to 45 days they will probably drop; 33% voted for this direction, 45% said rates will remain unchanged, and 22% predicted a rise.

The spread between Treasuries and mortgages is expected to decrease. According to MBAs forecast, rates will follow, but not rise as high as Treasuries in 2004 because lower refinance activity increases competition and thus, narrows the spread. The report said the year will end with rates in the 6.3% to 6.5% range and 2005 will end with rates slightly over 7%.

The 10-year Treasury note closed Thursday at a yield of 3.95% and price of 102 12/32, while a week ago the figures stood at 3.97% and 102.21875.