The evidence is mounting that a new boom in mortgage refinancings is just around the corner.
In fact, some strong evidence may have slipped by little-noticed last week, according to Mortgage Strategist, published by PaineWebber Inc. and written by mortgage analysts Laurie Goodman and Linda Lowell.
The publication points out that the Mortgage Bankers Association's raw index of application volume jumped 47% for the week ended June 9, and that refi activity jumped by 83%.
"Some market participants may have missed the full ferocity of the response (to low rates), since most newswire and market commentators report the smoothed and seasonally adjusted MBA indices rather than a change in raw volume," the analysts continue.
Smoothed over three weeks and adjusted, the application indexes behaved more mildly, with refi and purchase applications each gaining about 28%.
PaineWebber is expecting originations to take off soon. It points out that the Federal Home Loan Mortgage Corp. lender survey puts the 30-year mortgage rate at 7.55% for the week of June 16, while the 15-year model was at 7.03% and adjustables at 5.88%.
"At these levels, we expect refinancing activity to continue to gain momentum. Furthermore, the spread between the 15- and 30-year rates is currently 52 basis points - making a 15-year loan as attractive compared to a 30-year loan as at any point during the 1991-94 rally."
PaineWebber believes borrowers with seasoned loans in the 9% area will find 15-year mortgages attractive for refinancing.
"In other words, we expect to see more sharp increases in the MBA indices in the weeks ahead," Ms. Goodman and Ms. Lowell conclude.
"Strong marketing programs from the nation's mortgage bankers have begun to come on line (our favorite is a TV ad that asserts the lender can approve a refi application over the phone faster than the borrower can order and take delivery on a pizza.) The stage is set."
