United States home refinance activity falls despite lower mortgage rates

Spurred by low inventories and rising prices, mortgage applications for new home purchases jumped 9.2 percent in January over the same period a year ago, according to a survey by the Mortgage Bankers Association's (MBA). On an unadjusted basis, the Index decreased by 1%. Average FICO scores decreased from 726 in December to 722 in January, with conventional refinance FICO scores falling from 739 to 732, FHA refinance FICO scores tumbling from 654 to 651 and VA refinance FICO scores dipping from 709 to 707.

Mortgage applications to purchase a home, which are less rate-sensitive week to week, fell 5 percent from a week earlier and are just 3 percent higher than a year ago.

The refinance share of mortgage activity once again hit a record low and decreased to 46.9% of total applications, its lowest level since June 2009. On a year-over-year basis, the VA delinquency rate declined 12 basis points. The FHA share remained unchanged at 11.9%.

MBA's survey indicated conventional loans were 67.2 percent of loan applications in January 2016; FHA loans were 18.6 percent; Veteran's Administration loans comprised 13 percent; and RHS/USDA loans represented 1.1 percent.

On the other hand, the adjustable-rate mortgage share of activity increased to 7.5% of total applications, its highest level since October 2015.

Yet the average 30-year mortgage rate dipped to 4.32% from 4.35%. (All 80% LTV loan reports include the origination fee.) For mortgages with jumbo loan balances, the average contract interest rate ($424,100 or greater) increased to 4.28% from 4.27%, with points for 80% LTV loans decreasing to 0.27 from 0.31. "On Feb. 1, Ginnie Mae implemented new criteria regarding the inclusion of VA-streamlined refinances in certain mortgage-backed-security pools, and this likely led to a decrease in streamlined refinances last week". Mortgage rates have retreated from more than two-year peaks in step with lower bond yields. Closing rates for all loans decreased slightly to 72.2 percent, down from the high of 73.2 percent in December, and the average time to close all loans increased to 51 days in January up from 50 days the month before.

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