Purchase Applications Drop Further

Purchase mortgage applications dropped further, remaining at a 13-year low for the second week in a row while refinance applications rose to a high last seen in October 2009, according to the latest Mortgage Bankers Association's Market Composite Index. The MCI for the week ended May 21 increased 11.3% on a seasonally adjusted basis from one week earlier and it increased 10.3% on an unadjusted basis. The Refinance Index increased 17.0% from the previous week as the seasonally adjusted Purchase Index decreased 3.3% from one week earlier. "Refinance application volume jumped last week as continuing financial market turmoil related to the budget crises in Europe extended the opportunity for homeowners to lock in at historically low mortgage rates," said Michael Fratantoni, MBA's vice president of research and economics. At the beginning of May, the survey found the market share of refi applications was just over 50%; the most recent survey shows refis make up 72.2% of total applications, an increase from 68.1% the previous week; this is the highest refi share observed in the survey since December 2009. The market share of adjustable-rate mortgage applications fell from 6.3% to 6%. The average contract interest rate for the 30-year fixed-rate mortgage fell three basis points from 4.83% to 4.80% for the current week with points remaining at 1.08 (including the origination fee) for loans with an 80% loan-to-value ratio, according to the association. The average contract interest rate for 15-year FRMs bucked the declining rate trend, increasing by 6 bps during the week to 4.25%. The average contract interest rate for one-year ARMs was up by 2 bps over the previous week, to 6.83% for this week.