Refinancing Applications Jump by Double Digits

Refinancing activity spiked during the week ended May 11, rising 13.0 percent from the previous week’s level according to the Weekly Mortgage Applications Survey released this morning by the Mortgage Bankers Association (MBA).   Refinancing represented 74.9 percent of all applications compared to 72.1 percent the previous week.  The increase drove the Market Composite Index, a measure of mortgage application volume, up 9.2 percent on a seasonally adjusted basis and 8.7 percent unadjusted from the week ended May 4.  </p

Refinancing more than offset a 2.4 percent dip in both the seasonally adjusted and the unadjusted Purchase Indices on a weekly basis. The unadjusted index was 1.0 percent lower than during the same week in 2011.</p

The four week moving averages for all indices were up.  The Market Index rose 1.77 percent, the seasonally adjusted Purchase Index 1.57 percent, and the Refinance Index 1.88 percent.  </p

“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,” said Michael Fratantoni, MBA’s Vice President of Research and Economics.  “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.”Every fixed rate covered by MBA established a new record low during the week and the effective rate of most loans was also down.  The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($417,500 or less) dropped to 3.96 percent from 4.01 percent, with points decreasing to 0.37 from 0.41.</p

Purchase Index vs 30 Yr Fixed</b</p