October 13 2010 (Shirley Allen)

Refinance demand surged higher this week as mortgage rates hit record lows according to the latest survey released by the Mortgage Bankers Association (MBA). MBA’s refinance index had fallen for the last five straight weeks but home loan demand increased 14.6 percent for the week ending October 8th as mortgage rates have fallen to a new record low of 4.21% for a 30 year fixed rate loan.

“Refinance application volumes are now close to the highest level this year,” said Michael Fratantoni, MBA’s Vice President of Research and Economics, in a release.

“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.”

The refinance index jumped 21 percent from the previous week, while purchase activity slumped 8.5 percent.
FHA loan volume had surged ahead of the underwriting changes that went into effect on October 4, but has since fallen to the average seen over the past four months.

The refinance share of mortgage activity increased to 83.1 percent of total applications from 78.9 percent the previous week, its highest level since January 2009.

The 15-year fixed also hit a new record low, falling to 3.62 percent from 3.73 percent.

The mortgage rates are good for mortgages at 80 percent loan-to-value – pricing adjustments can lower or raise your actual interest rate.

Keep in mind the MBA’s weekly survey covers more than half of all retail, residential loan applications, but does not factor out duplicate or rejected apps, which have surely increased since the mortgage crisis got underway a few years back.