The huge sell-off in the stock market on Aug. 4 capped a week of declines in the Dow Jones Industrial Average which in turn helped to push the average contract rate on the 30-year fixed-rate mortgage down another 8 basis points that week.
This in turn drove refinance application volume to its highest level of the year, leading to a 22.7% increase in application volume the week ended Aug. 5, according to the Mortgage Bankers Association.
It is a market truism that if people are selling their stocks, they are putting their money into bonds and that drives bond yields, and consequently mortgage rates, down.
The Refinance Index increased by 30.4%, while the seasonally adjusted Purchase Index fell 0.9% from the previous week. On an unadjusted basis, the Purchase Index is 4.9% higher than the same week in 2010.
Michael Fratantoni, MBA's vice president of research and economics, said, "Over the past month, refinance application volume has increased by 63%. Refinance applications for jumbo loans increased by almost 75% relative to last week." The one clunker: "Despite these low mortgage rates, applications for home purchase have remained little changed through the summer."
The market share of refi applications increased to 75.6% from 70.1% one week prior. MBA tracks activity through its proprietary application index.
The average contract interest rate for 30-year fixed-rate mortgages was down 8 basis points to 4.37% from 4.45%. Points increased to 1.12 from 0.78 (including the origination fee) for 80% loan-to-value ratio loans.
The average contract interest rate for the 15-year FRM remained at 3.52%, the lowest recorded level since the MBA Application Survey started in 1990. Points declined to 0.96 from 1.02.
