“As short-term rates increased over the second half of 2005, homeowners moved away from adjustable rate loans into fixed-rate loans,” said Doug Duncan, MBA’s chief economist and senior vice president of research and business development.  “Fixed-rate loans are more attractive as short term interest rates rise to similar levels as long term rates.  Not surprisingly, consumers respond to interest rate driven changes in opportunities in the marketplace.”

Key findings from the survey (percentages are based on dollar volume of originated loans):

• Total first mortgage originations increased by 14 percent from the first half to the second half of 2005. 
• The refinance share of originations increased to 51 percent in the second half. 
• During the second half, 72 percent of refinance loans contained a cash-out component.
• Fixed-rate products (including fixed-rate interest-only) were 47 percent of loan originations in the second half of 2005, up from 42 percent in the first half.
• Demand for fixed-rate interest-only originations increased sharply to 13 percent of origination volume in the second half from 7 percent in the first half.
• Reverse mortgage originations increased by 45 percent over their level in the first half, with originations of FHA’s Home Equity Conversion Mortgages rising by 48 percent and other reverse mortgage volume increasing by 27 percent.

In a separate section of the survey: 

• Total second mortgage originations increased by 13 percent since the first half of 2005.
• Closed-end second mortgages, which tend to be fixed-rate loans, increased by 33 percent, while home equity lines of credit (HELOCs) declined by 5 percent. 

The survey included 114 participants, including a majority of the top 30 originators.  During the second half of 2005, survey participants originated $866 billion in first mortgages and $189 billion in second mortgages.

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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,200 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA's Web site:  www.mortgagebankers.org.