By Mike Colpitts
Driven by the lowest interest rates in U.S. history, mortgage originations soared for the third straight week as loan buyers moved to take advantage of lower 
mortgage rates. Loan applications jumped 9.3% last week, according to the Mortgage Bankers Association.
Refinances saw the largest surge in mortgage applications, rising 11.2% for the week as homeowners who could qualify for a new loan on their properties came took out in greater numbers. An estimated 2.4-million U.S. homeowners have been turned down for refinancing in the last three years as a result of lower home prices with the values of their properties declining.
Interest rates on a 30-year fixed rate mortgage dropped to 4.25% on a fully executed loan from 4.29%. The rate on fixed 15-year mortgages increased a single basis point for the week to 3.47%, while mortgage rates on the 5-year adjustable rate loan dropped by a single basis point to 2.95%.
The seasonally adjusted purchase index also rose 2.6% from the previous week, indicating a slight jump in home purchase activity as those shopping for a new home take advantage of lower prices. However, refinances composed 79.7% of mortgage applications for the week.
“Mortgage rates declined last week, at least partially in response to the Fed’s announcement that it would shift its portfolio towards longer-term Treasury securities, and that it would resume buying mortgage-backed securities,” said MBA Vice President of Research and Economics Mike Fratantoni. “With lower rates, refinance application volume increased to its highest level since August 19.”
Fratantoni noted purchase application volume also increased. “However, the increase was in conventional purchase applications, which were up by 4.9 percent,” he said. “Purchase applications for government loans fell by 0.6 percent over the week, likely influenced by the pending decline in FHA loan limits.”
The average loan size for home purchases was $212,700 in August, up by an average of $1,500 from a year ago. Home refinancing rose sharply by an average of $32,000 from last summer as more homeowners with less equity in their homes took advantage of lower mortgage rates. The largest loans were made in the West, averaging $304,800.