Huge Jump in Mortgage Apps as Rates Continue Downward

Yet again, record low interest rates have led to a spike in refinance volume, driving total mortgage application volume up by 16.6% on a seasonally adjusted basis for the week ended Sept. 28, according to the Mortgage Bankers Association.

The Refinance Index increased by 20% from the previous week to its highest level since April 2009. The seasonally adjusted Purchase Index increased by 4%.

When compared with the same week in 2011, the Purchase Index was up by 11% on an unadjusted basis.

The market share of refi apps increased to 83%, from 81% the previous week. However, the HARP share of refinance applications decreased to 23% from 26% the prior week.

“Refinance application volume jumped to the highest level in more than three years last week as each of the five mortgage rates in MBA's survey dropped to new record lows in the survey,” said Mike Fratantoni, MBA’s vice president of research and economics. “Financial markets continue to adjust to QE3, as the ongoing presence of the Federal Reserve as a significant buyer of mortgage-backed securities applies downward pressure on rates. Although there was a slight decline in the HARP share of refinance activity, the level of HARP volume remains steady.”

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) declined by 10 basis points from the previous week to 3.53%. The average contract interest rate for 30-year FHA-insured loans declined by seven basis points to 3.37%.

The rate for 30-year FRMs with jumbo loan balances was down five basis points to 3.82%. The average contract interest rate for 15-year FRMs fell eight basis points to 2.90%. The rate for the 5/1 ARM was 2.59%, a decrease of two basis points.