Mortgage application volume rose 14.6% last week on a seasonally adjusted basis, the first increase in five weeks, as record low rates finally enticed existing borrowers to refinance, according to new figures released by the Mortgage Bankers Association.
The trade group noted that the gain was fueled by a 21% increase in refinancing applications. However, the purchase market took it on the chin, falling 8.5% from the previous week and over 37% from the same week last year.
The market share of refi applications made up 83.1% of all new loan activity, its highest level since January 2009. MBA tracks activity through its proprietary application index.
MBA vice president Michael Fratantoni said "After five weeks of steadily declining rates to yet another new low, borrowers who had been on the fence jumped off, which factored into refinance activity surging more than 20%. Refinance application volumes are now close to the highest level this year. Purchase activity remains generally weak, but applications for conventional purchase mortgages are now at their highest level since the beginning of May following the expiration of the tax credit."
This week's results did confirm one MBA observation from the previous week, Fratantoni continued. The large jump in applications for Federal Housing Administration-insured loans recorded in last week's survey was because of the stricter standards which went into effect on Oct. 4. This week's activity, he said, was closer to the average for the past four months.
MBA reported that the average contract interest rate for a 30-year fixed rate mortgage decreased by four basis points to 4.21% from 4.25% the week prior, a new low. Points increased to 1.02 from 1.00 (including the origination fee) for loans with an 80% loan-to-value ratio.
Meanwhile, the average contract interest rate for a 15-year FRM fell by 11 bps during the week to 3.62% with points decreasing to 1.06 from 1.14.
