This led to an increase of 11.2% in mortgage application volume on a seasonally adjusted basis. The data for the prior week was adjusted to take Labor Day into account.
The share of refi apps zoomed up to 61%, after bottoming at 57% one week ago. The subset of Home Affordable Refinance Program applications for the week was moved up to 40%, the highest since MBA started tracking this area in 2012. For the previous two weeks, HARP made up 38% of refi app volume.
Purchase application volume increased 3% on a seasonally adjusted compared with the previous week. On an unadjusted basis, it is 1% higher for the same week in 2012.
Brent Nyitray, director of capital markets at iServe Residential Lending, commenting about the Federal Reserve’s meeting later today, said, “Certainly the Fed is noticing the drop-off in housing sector activity as rates have risen. This will probably make them want to maintain current purchases of MBS and cause them to lower Treasury purchases only. The consensus seems to be the ‘tiny taper’ scenario, where the Fed cuts Treasury purchases by $10 billion a month starting in October.”
HSH.com’s weekly mortgage radar found the average rate for the 30-year fixed-rate mortgage decreased by three basis points during the week ended Tuesday, to 4.65%.
"If the Fed doesn't make a change, it may inadvertently signal that it thinks the economy is still weak; moving quickly might send signals that the Fed has new concerns over inflation forming in certain financial markets.
“Either would be outside the market's expectations, and would be disruptive. Hence, the Fed is most likely to move slowly and cautiously, and take pains to carefully describe what they think will happen next, so as to make as few waves as possible,” said Keith Gumbinger, vice president of HSH.com.
Zillow Mortgage Marketplace’s Erin Lantz said Lawrence Summers’ decision to remove his name from contention to head the Fed was responsible for mortgage rates dropping on Monday.
She continued, “His decision makes it more likely Fed vice chair Janet Yellen will take the role and continue Ben Bernanke’s fairly accommodative monetary policy that has helped keep rates low.”
The company’s rate tracker finds the 30-year fixed mortgage rate falling compared to the past week by 11 basis points to 4.38% as of Tuesday afternoon.
According to the MBA application survey, the average contract rate for the 30-year conforming FRM (MBA defines this as a loan with a balance of $417,500 or under) for the survey period is 4.75%, down five basis points from the previous week. Federal Housing Administration-insured loans had an average contract rate for the week of 4.5%, a decrease of six basis points from the previous week.
Jumbo 30-year FRMs saw the average contract fell by just one basis point to 4.83%. MBA said the rate for the 15-year FRM decreased basis points to 3.81%.
The share of adjustable-rate mortgages was 7% of the week’s loan applications and the average contract rate for the 5/1 ARM decreased five basis points to 3.54%.