by Calculated Risk on 10/24/2012 07:03:00 AM

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

The Refinance Index decreased 13 percent from the previous week to the lowest level since late August. The seasonally adjusted Purchase Index decreased 8 percent from one week earlier.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.63 percent from 3.57 percent, with points increasing to 0.45 from 0.44 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

Click on graph for larger image.

The first graph shows the refinance index.

The refinance activity is down about 20% over the last three weeks, but activity is still very high - and will probably remain high with mortgage rates near record lows.

The MBA expects mortgage originations to decline next year: MBA Sees 2013 Residential Mortgage Originations Hitting $1.3 Trillion, Revises 2012 Estimate Upward to $1.7 trillion

The Mortgage Bankers Association (MBA) expects to see $1.3 trillion in mortgage originations during 2013, largely driven by a spillover of refinances into the first half of the year. MBA also upwardly revised its estimate of originations for 2012 to $1.7 trillion. MBA expects to see purchase originations climb to $585 billion in 2013, up from a revised estimate of $503 billion for 2012. In contrast, refinances are expected to fall to $785 billion in 2013, down from a revised estimate of $1.2 trillion in 2012.

“We expected 2012 originations to be front-loaded in the first half of the year, with refis falling off with rate increases. Instead we saw the refinance market grow during the year due to a combination of low rates, thanks to QE3 and slowing global growth because of continuing problems in Europe, and adjustments in the HARP and FHA refinance programs,” said Jay Brinkmann, MBA’s Chief Economist. “We expect 2013 refinance originations to play out like our original expectations for 2012, with a long tail of refis extending through the first half of the year followed by a rapid drop-off in the second half.”

Brinkmann continued, “In contrast, we expect a 16% increase in purchase originations in 2013 over 2012, with every quarter in 2013 exceeding the same quarter of 2012. The increase in purchase volumes will be driven by continued modest growth in the economy, an increase in owner-occupied sales financed with mortgages as opposed to cash purchases by investors, an increase in new home sales and a small increase in average home prices. "

The second graph shows the MBA mortgage purchase index. The purchase index has been mostly moving sideways over the last two years.

The MBA expects this index to start increasing in 2013.