It has been nearly 42 months since the pace of mortgage refinancing last reached the current rate of activity. Coinciding with interest rates that seem to have no bottom, homeowners are taking advantage of unbelievably low rates to reduce their monthly mortgage payments.
According to the Mortgage Bankers Association (MBA), the volume of mortgage loan applications, as measured by its Market Composite Index, increased 16.6% on a seasonally adjusted basis compared to last week.
The Refinance Index component of the composite metric climbed 20% from the prior week. The last time the refinance applications gauge reached this level was in April of 2009.
Mortgage applications completed for home purchases, as measured by the MBA’s Purchase Index, increased a seasonally adjusted 4% from the previous week. This represents an 11 percent increase above applications completed for the same week last year.
Refinance Applications Up for all Rates
Eighty-three percent of mortgage application activity for the week ending September 28, 2012 concerned mortgage refinancing compared to 81 percent the prior week. Applications for adjustable-rate mortgages made up 4 percent of all mortgage loans approved. However, the share of refinance mortgages for the Home Affordable Refinance Program (HARP) decreased from 26 percent the prior week to 23 percent for the
Financial Markets Adjusting
Equities and the bond markets continue to make adjustments to the latest round of quantitative easing (QE3) initiated by the Federal Reserve a few weeks ago, said Mike Fratantoni, Vice President of Research and Economics for MBA.
After its mid-September policy meeting, the Fed announced a plan to buy $40 billion per month in mortgage-backed securities. The Fed hopes to keep the interest rates for home mortgages and other products low in order to boost the economy.
The chairman of the Federal Reserve, Ben Bernanke may it clear that the central bank will not hesitate to take additional action if the economy fail to respond.
Average Contract Interest Rates Down
The MBA survey reveals that the average interest rates for all mortgage measured decreased over the prior week. The 30-year fixed-rate product for conforming loans dropped from 3.63 percent to 3.53 percent. Points, which include origination fees, also fell from 0.41 percent to 0.35 percent.
The current conforming loan balance limit is $417,500 or less.
The average interest rate for a 30-year fixed-rate FHA-insured mortgage dropped to 3.37 percent compared to 3.44 percent the previous week. Points decreased from 3.44 percent to 3.37 percent.
Borrowers who prefer a shorter loan term took advantage of lower rates for the 15-year fixed-rate mortgage. The average contract interest rate for this product decreased from 2.98 percent the week before to 2.90 percent. Points for the 15-year mortgage also dropped from 0.41 percent to 0.27 percent.
The 5 ½ adjustable-rate-mortgage decreased to 2.59 percent from 2.61 percent the prior week.
All rates mentioned apply to mortgages with an 80 percent loan-to-value (LTV) ratio.