Bolstered by a jump in refinances and record low mortgage rates as a result of the Obama administration’s new refinancing program for homeowners, mortgage applications rose 39% in 2011, despite a fall-off in applications during the last two weeks.
Applications for new home mortgages combined with refinances dropped 3.7% for the last two weeks of the year, according to the Mortgage Bankers Association survey. The fall off in applications is fairly typical for the Christmas and New Year’s holidays.
Refinances grew to make up 81.9% of all mortgage applications during the period, composing the highest share of the composite index during the year. However, additional charges that go into effect in February could have a growing impact on the volume of home mortgages, including refinances over the early part of the New Year.
“Refinance applications continue to account for the vast majority of total application volume,” said bankers’ chief economist Michael Fratantoni. “As part of legislation to extend the payroll tax holiday, guarantee fees for loans purchased by the GSEs (Freddie Mac and Fannie Mae) and mortgage insurance premiums for FHA loans will eventually increase. Given the announced implementation of this change, we do not expect to see an impact on mortgage rates and application activity until at least February.”
The rate on the 30-year fixed rate mortgage was 4.07% with an average of 0.53 points during the last week of the year, the lowest the rate has reached on fully executed mortgages during 2011. The average contract mortgage rate on the fixed 15-year loan was 3.37%. The adjustable rate 5/1 ARM averaged 2.91%.
Banking analysts expect an early year boom in refinancing home mortgages to develop after the holidays as a result of the Obama administration new refinancing program, which has removed loan-to-value limits on most refinancing.