MBA Mortgage Applications, Week of August 27-31

TRADEX GLOBAL INTERNAL COMMENTARY

The total number of mortgage applications fell 2.5% last week, despite the decline in interest rates.  The refinance index declined 3% from the previous week to its lowest level since May.  The percentage share of total applications to refinance stayed at 79%.  Two things that we have been saying are now apparently happening: 1) Refinancings have slowed and may have already peaked (this is very good news for our IO positions), and; 2) Tougher lending standards and economic uncertainty are still keeping potential new home buyers on the sidelines.  We still believe that housing prices are bouncing around at the bottom (which is good for our distressed RMBS positions), and after seeing the Case-Shiller report we have some confidence in HPA (house price appreciation). Housing is not totally out of the woods, but we are confident that the sector will deliver positive results inside the Tradex portfolios.  Keep nimble - Michael Beattie

EXTERNAL RESEARCH COMMENTARY

The number of total mortgage applications filed in the U.S. last week fell 2.5% despite a decline in interest rates, the Mortgage Bankers Association said Wednesday. The refinance index declined 3% from the previous week to its lowest level since May, according to the MBA's weekly survey, which covers more than three-quarters of all U.S. retail-residential-mortgage applications. On a seasonally adjusted basis, the purchasing index slipped 0.8% from a week earlier, MBA said. Low interest rates have attracted many homeowners to refinancing deals, though tougher lending requirements and economic uncertainty still keep many prospective home buyers from taking out new debt. The share of applications filed to refinance an existing mortgage was unchanged from the prior week at 79% of total applications. Adjustable-rate mortgages rose to 5% of total activity from 4% a week earlier. The average rate on 30-year fixed-rate mortgages with conforming loan balances slipped to 3.78% from 3.8% in the previous week. Rates on similar mortgages with jumbo loan balances edged down to 4.05% from 4.06% a week earlier. The average rate on FHA-backed 30-year fixed-rate mortgages declined to 3.54% from 3.6% in the prior week. The average for 15-year fixed-rate mortgages eased to 3.1% from 3.12% a week earlier. The 5/1 ARM average slid to 2.64% from 2.68% in the prior week.

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