Lower mortgage rates, driven by the debt ceiling negotiations and bad economic news, led to a 7.1% increase in application volume the week ended July 29, according to the Mortgage Bankers Association. But, an economist with the group pointed out, refinance volume is still 30% lower than it was at this time last year.
The Refinance Index increased by 7.8%, while the seasonally adjusted Purchase Index rose 5.1% from the previous week. On an unadjusted basis, the Purchase Index is 5.9% higher than the same week in 2010.
Michael Fratantoni, MBA's vice president of research and economics, said the situation in Washington caused Treasury rates to fall over 20 basis points. That resulted in the 15-year fixed-rate mortgage reaching a low point in the history of the application survey.
And even though refis did increase, they are still well off of levels seen in the past. "Factors such as negative equity and a weak job market continue to constrain borrowers. Purchase activity increased off of a low base, returning to levels of one month ago, but remains weak by historical standards," he said.
The market share of refi applications increased to 70.1% from 69.6% one week prior. MBA tracks activity through its proprietary application index.
The average contract interest rate for 30-year fixed-rate mortgages was down 12 basis points to 4.45% from 4.57%, its lowest level since Nov. 5, 2010. Points decreased to 0.78 from 1.14 (including the origination fee) for 80% loan-to-value ratio loans.
The average contract interest rate for the 15-year FRM fell by 15 basis points to 3.52% from 3.67%, the lowest recorded level since the MBA Application Survey started in 1990. Points declined to 1.02 from 1.08.
