Refinancing Applications Back to Early Summer Levels

There was a big jump in the volume of applications for mortgage refinancing last week as customers reacted to the lowest interest rates since early summer.  Applications for home purchases also increased slightly during the week ended October 25.

The Mortgage Banker Association's (MBA) Market Composite Index, a measure of overall mortgage loan application volume, was up 6.4 percent on a seasonally adjusted basis from the volume during the week ended October 18.  On an unadjusted basis the Composite Index rose by 6 percent.  The unadjusted Purchase Index increased 2 percent from the previous week and was 0.1 percent lower than during the same week in 2012.

Purchase Index vs 30 Yr Fixed

Applications for refinancing were up by 9.0 percent and constituted a 67 percent share of all applications.  This was the highest market share captured by refinancing since June and was 2 percentage points higher than the previous week.

Refinance Index vs 30 Yr Fixed

Average mortgage interest rates, both contract and effective, fell during the week for typical 80 percent loan-to-value ratio loans.  Contract rates for all products tracked in MBA's Weekly Mortgage Applications Survey were at their lowest levels since June.

The average contract rate for 30-year fixed mortgages (FRM) with conforming loan balances of $417,000 or less was 4.33 percent compared with 4.39 percent the previous week.  Points, which include the origination fee, decreased from 0.41 to 0.26.

Jumbo 30-year FRM (loan balances in excess of $417,000) had an average contract rate of 4.36 percent, down from 4.43 percent.  Points increased from 0.26 to 0.27.

The average rate for an FHA backed 30-year FRM was 4.06 percent with 0.17 point.  The previous week the rate was 4.15 percent with 0.27 point.

Fifteen-year FRM had an average contract rate of 3.42 percent, 9 basis points below the average rate a week earlier.  Points were unchanged at 0.30.

Adjustable rate mortgages (ARM) garnered a 7 percent share of applications, a slight decrease from the previous week.  The average rate for a 5/1 ARM was 3.17 percent with 0.38 point compared to 3.25 percent with 0.26 point.

MBA's weekly survey which has been conducted since 1990 covers over 75 percent of all U.S. retail residential mortgage applications.  Respondents include mortgage bankers, commercial banks and thrifts.  Base period and value for all indexes is March 16, 1990=100.