Steady Low Rates Drive Refi Activity

August 20th, 2010

Written by Greg Frost Jr.

Categories: Economy, Mortgage Rates

Rates hovering near historic lows spurred refinance application activity to its highest level in 15 months, the Mortgage Bankers Association reported in its Weekly Mortgage Applications Survey for the week ending August 13. 

The Market Composite Index, driven by refinancings, increased by 13.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased by 12.4 percent compared to the previous week. The four-week moving average rose by 2.6 percent. 

The seasonally adjusted Refinance Index increased by 17.1 percent from the previous week; this represented its highest level since the week ending May 15, 2009. The four-week moving average rose by 3.2 percent. The refinance share of mortgage activity increased to 81.4 percent of total applications from 78.1 percent the previous week, the highest share observed since January 2009.

The seasonally adjusted Purchase Index fell by 3.4 percent from one week earlier. The unadjusted Purchase Index decreased by 4.6 percent compared to  the previous week and was 38.6 percent lower than the same week one year ago. The four-week moving average rose by 0.1 percent.

Key interest rates moderated. The average contract interest rate for 30-year fixed-rate mortgages increased to 4.60 percent from 4.57 percent, with points increasing to 0.92 from 0.89 (including the origination fee) for 80 percent loan-to-value ratio loans.  The effective rate also increased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.99 percent from 3.95 percent, with points decreasing to 1.05 from 1.08 (including the origination fee) for 80 percent LTV loans. The effective rate also increased from last week.

The average contract interest rate for one-year adjustable-rate mortgages decreased to 6.90 percent from 7.00 percent, with points decreasing to 0.21 from 0.22 (including the origination fee) for 80 percent LTV loans. The ARM share of activity decreased to 5.7 percent from 5.9 percent of total applications from the previous week.

The survey covers more than 50 percent of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.

Key, Melissa

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