WASHINGTON (1/9/14)--Mortgage market activity was weak at the end of last year and at the start of the new year, according to a report released on Wednesday. The Mortgage Bankers Association's composite index fell by 4.2% for the week ending Dec. 27 and advanced by 2.6% for the week ending Jan. 3.
Both components of the index fluctuated during the two week period, which was adjusted for Christmas and New Year's celebrations. The purchase index was up by 2.4% for the week ending Dec. 27 and down by 0.5% for the week ending Jan. 3. The refinance index was down by 8.9% for the week ending Dec. 27, and up by 4.6% for the week ending Jan. 3.
Four-week moving averages of the purchase and refinance indexes have fallen by 9% and 20% over the past month and by 7.4% and 64% over the past year.
A 12-week moving average of the composite index is near 345--its lowest reading in 13 years (Economy.com Jan. 8)
Refinancing accounted for 64% of all applications and 57% of prospective loan volume for the week ending Jan. 3. The adjustable rate mortgage share of market activity remained steady at 8%.
Higher interest rates are acting as a drag on demand, with 15-year and 30-year fixed mortgage rates approaching their highest levels since April 2011, according to Moody's. The rate for 30-year, fixed-rate mortgages rose by eight basis points (bp) to 4.72% over the two weeks covered by the latest survey--11bp higher on a monthly basis and 111 bp higher on a year-over-year basis. The rate for 30-year, fixed-rate jumbo mortgages increased by 3 bp to 4.66%, while the five-year, adjustable rate mortgage was up by 7 bp to 3.33%--69 bp higher on a year-over-year basis.
Moody's noted that while the composite index's weak performance can largely be attributed to a drop-off in refinance applications, the purchase index is near its mid-2010 equivalent, when the expiration of the homebuyer tax credit caused the mortgage market to cool down significantly.
November data showing an annual decline in real disposable income growth and a nine-month savings rate low could also explain lackluster market activity, the research and ratings firm said.