Mortgage rates fall, mortgage application volume rises

Volume improved for the week

According to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 18, 2012, mortgage applications increased 3.8 percent from one week earlier, as the refinance index makes a comeback, rising another 5.6 percent from the week prior, marking the third week of increases after sliding substantially previously. The Purchase Index fell 3.0 percent, losing gains made over the past month.

“Continuing negative developments in the sovereign debt crisis in Europe, particularly in Greece and Spain, as well as the recent French elections, which have shifted political power in a manner that will likely show less support for European austerity, helped push the US 10 Year Treasury yield below 1.7 percent last week,” said Michael Fratantoni, MBA’s Vice President of Research and Economics.

Fratatoni continued, “Mortgage rates again dipped to new record lows in the survey, which spurred more borrowers back into the refinance market. As a result, applications for refinance loans have increased for the third straight week and are at the highest level since February of this year. The HARP share of refinance applications was essentially unchanged over the week at 28 percent, so it was not the primary driver of the increase over the previous week.”

The MBA reports that the refinance share of mortgage activity increased to 76.6 percent of total applications from 74.9 percent the previous week, and the adjustable-rate mortgage (ARM) share of activity decreased to 5.0 percent from 5.4 percent of total applications from the previous week. The government purchase share decreased over the week from 36.3 percent to 36.2 percent of all purchase applications. This is the second lowest government purchase share since March 27, 2009.

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Varied interest rates

According to the MBA:

• The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.93 percent, the lowest rate in the history of the survey, from 3.96 percent, with points increasing to 0.39 from 0.37 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate decreased from last week.
• The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) increased to 4.25 percent from 4.20 percent, with points increasing to 0.42 from 0.36 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
• The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.73 percent, the lowest rate in the history of the survey, from 3.75 percent, with points decreasing to 0.57 from 0.66 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
• The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 3.26 percent, the lowest rate in the history of the survey, from 3.26 percent, with points increasing to 0.42 from 0.41 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
• The average contract interest rate for 5/1 ARMs increased to 2.83 percent from 2.80 percent, with points increasing to 0.42 from 0.37 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.