Falling Interest Rates Leads to Surge in Refi Applications

August 11, 2011 (Chris Moore)

The lowest mortgage rates of 2011 have lead to a surge in refinance applications according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 5, 2011. The Market Composite Index, a measure of mortgage loan application volume increased 21.7 percent powered by a 30.4 percent increase in refinance activity.

On an unadjusted basis, the Index increased 20.9 percent compared with the previous week. The four week moving average for the seasonally adjusted Market Index is up 9.7 percent.

Purchase Applications:

The seasonally adjusted Purchase Index decreased 0.9 percent from one week earlier. The four week moving average remained unchanged for the seasonally adjusted Purchase Index.

The unadjusted Purchase Index decreased 1.2 percent compared with the previous week, and is 4.9 percent higher than the same week one year ago.

Refinance Activity:

The Refinance Index increased 30.4 percent from the previous week. The four week moving average is up 13.7 percent.

The refinance share of mortgage activity increased to 75.6 percent of total applications from 70.1 percent last week.

Mortgage Interest Rates:

30-year fixed-rate mortgage (FRM): The average contract interest rate decreased to 4.37 percent from 4.45 percent last week, with points increasing to 1.07 from 0.78 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate decreased from last week.

15-year fixed-rate mortgage (FRM): The average contract interest rate was unchanged at 3.52 percent from last week, with points decreasing to 0.96 from 1.02 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

ARMs:

The adjustable-rate mortgage (ARM) share of activity decreased to 6.1 percent from 6.6 percent the previous week.

This week’s data indicates that home purchases continue to remain stagnate while current homeowners who can still refinance are taking advantage of the current low mortgage interest rates.

“Amid substantial market turmoil last week, mortgage rates dropped to their lowest levels of the year, and refinance applications jumped more than 30 percent to their highest levels of the year,” said Mike Fratantoni, MBA’s Vice President of Research and Economics. “Over the past month, refinance application volume has increased by 63 percent. Refinance applications for jumbo loans increased by almost 75 percent relative to last week. Despite these low mortgage rates, applications for home purchase have remained little changed through the summer.”

Tags: MBA, home purchase applications, mortgage rates, fixed rate mortgage, adjustable rate mortgage, refinance, interest rate

Sources:
Mortgage Bankers Association