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European debt crisis aides U.S. mortgage application volume

The volume of mortgage applications continues to rise, and after weeks of falling, the refinance share is finally up. The financial troubles in Europe continues to have an impact on the American economy, including investment in securities and housing investments.

mortgage trends

Mortgage application volume up

According to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 11, 2012, mortgage application volume rose 9.2 percent from the week prior with the Refinance Index rising 13 percent and Purchase Index 2.4 percent during the same period.

After weeks of falling, the refinance share of mortgage activity rose to 74.9 percent of the total applications from 72.1 percent the week prior and the adjustable-rate mortgage (ARM) share continues to fall, now at 5.4 percent of total applications.

“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.

Fratantoni continued, “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.”

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In April, the MBA reports that the investor share of applications for home purchases was unchanged from March, at 5.7 percent, noting that the Pacific region saw the largest investor share of applications for home purchase at 9.5 percent.

Interest rate trends

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 3.96 percent, the lowest rate in the history of the survey, from 4.01 percent, with points decreasing to 0.37 from 0.41 (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) decreased to 4.20 percent, the lowest rate in the history of the survey, from 4.29 percent, with points remaining unchanged at 0.36 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
  • The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.75 percent, the lowest rate in the history of the survey, from 3.81 percent, with points increasing to 0.66 from 0.45 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
  • The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.26 percent, the lowest rate in the history of the survey, from 3.29 percent, with points increasing to 0.41 from 0.32 (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 decreased to 2.80 percent from 2.83 percent, with points increasing to 0.37 from 0.36 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

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