As apps slow, MBA sees signs of “burnout”

The rate of mortgage applications slowed during the week ending Feb. 12, according to the most recent Mortgage Bankers Association survey, which reported a seasonally-adjusted 2.1 percent decrease in its Market Composite Index week-over-week, a measure of loan application volume.

The MBA mortgage purchase index dropped 4 percent from the week earlier, based on seasonally-adjusted data, while the refinance index dropped 1.2 percent during that same time period. Meanwhile, the 30-year fixed-mortgage rate held steady at 4.94 percent week-over-week.

Michael Fratantoni, vice president of research with the MBA, said the data could be the result of borrower fatigue.

“Even though the rates are appealing,” Fratantoni said of the currently lower-than-normal mortgage rates, “we’re seeing signs of burnout. People are less responsive to this low level of rates.”

Fratantoni doesn’t think those low rates will stick around for much longer. With the Federal Reserve’s plan to back out of the mortgage market by the end of March, Fratantoni says mortgage rates will be on the rise in a blink.

“Our expectation is that mortgage rates will go up half a percent [when] the Fed leaves the market,” Fratantoni said, “very quickly.”

The Fed had pledged to buy around $1.25 trillion in residential mortgage securities early last year — there is about $80 billion left to go.

On top of that half of a percent climb, the MBA expects the mortgage rate to inch up an additional half percent before the end of the year, pushing the rate just above 6 percent. This could have the potential to dissuade already reluctant buyers, and Fratantoni said his organization expects 2010’s year-end refinancing volume to be 65 percent below 2009’s figure.

Still, Fratantoni said this is hardly doomsday data.

“In terms of the housing market… we’re turning toward a more normal [mortgage] rate,” Fratantoni said. “We don’t think [it will be] enough to harm the market.”