Record Low Mortgage Rates Sparks Refinancing Surge

May 17, 2012 (Chris Moore)

Mortgage application volume picked up last week as record low fixed rate mortgage rates sparked a surge in refinance applications according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 11th, 2012.

The Market Composite Index, a measure of mortgage loan application volume including purchase applications and refinance applications, increased a seasonally adjusted 9.2 percent from the previous week.

On an unadjusted basis, the Index increased 8.7 percent from the previous week. The four week moving average for the seasonally adjusted Market Index is up 1.77 percent.

Michael Fratantoni, MBA’s Vice President of Research and Economics, stated, “A flare up of the sovereign debt troubles in Europe once again led investors to flee to the safety of US Treasury securities last week. As a result, mortgage rates have reached new lows in our survey, and refinancing application volumes picked up substantially as a result. Survey participants indicated that this was not due primarily to HARP volume – the HARP share of refinances fell to 28 percent of refinance applications, down relative to last week and last month, when the share was just above 30 percent in April. The increase in refinance activity last week was concentrated in the conventional sector, which was up around 14 percent for the week, while government refinance applications were up only 4 percent.”

Purchase Applications:

The seasonally adjusted Purchase Index decreased 2.4 percent from the previous week. The four week moving average is up 1.57 percent for the adjusted Purchase Index.

The unadjusted Purchase Index decreased 2.4 percent compared with the previous week and was 1.0 percent lower than the same week a year ago.

Refinance Applications:

The Refinance Index increased 13.0 percent from the previous week. The four week moving average for the Refinance Index is up 1.88 percent.

The refinance share of mortgage activity increased to 74.9 percent of total applications from 72.1 percent the previous week.

Mortgage Interest Rates:

Average Contract Mortgages Rates
(80% loan-to-value)

Type of
Loan

Interest Rate (%)

Points

Effective Rate

Current

Previous

Current

Previous

30-Year FRM Conforming
($417,500 or less)

3.96*

4.01

0.37

0.41

Decreased

30-Year FRM Non-Conforming
($417,501 or more)

4.20*

4.29

0.36

0.36

Decreased

15-Year FRM

3.26*

3.29

0.41

0.32

Decreased

FHA 30-Year

3.75*

3.81

0.66

0.55

Increased

5/1 ARM

2.80

2.83

0.37

0.36

Decreased

*Record Survey Low

The adjustable-rate mortgage (ARM) share of activity decreased to 5.4 percent from 5.7 percent the previous week.

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

Sources:
Mortgage Bankers Association