Drawn into the market by record low rates, refinancing applications are now at their highest level since last spring and are driving the increase in this week's Mortgage Bankers Association Market Composite Index.
According to the trade group, refi applications now account for almost 80% of all news loans, the highest reading since April 2009. Moreover, almost 95% of all customers are choosing fixed-rate loans over ARMs.
"As rates on 30- and 15-year fixed-rate mortgages declined to the lowest levels recorded in the survey, refinance activity increased last week," said Michael Fratantoni, MBA's vice president of research and economics.
"The refinance index is up almost 30% over the past four weeks, but is still well below the peak seen last spring."
The Index increased 7.6% on a seasonally adjusted basis and 19.5% on an unadjusted basis from the previous week, which included the Independence Day holiday.
As for refi applications, conventional filings jumped 10.7% but government apps fell 4.2%.
The seasonally adjusted Purchase Index increased 3.4% from one week earlier, driven by an 8% increase in government purchase applications. Conventional purchase applications were essentially flat.
MBA reported that the average contract interest rate for a 30-year FRM declined 10 basis points to 4.59% from 4.69% for the previous week but with points increasing to 1.04 from 0.96 (including the origination fee) for loans with an 80% percent loan-to-value ratio, the association reported.
