Spurred by record low mortgage rates, applications to refinance home mortgages rose to a new high last week and applications for new home mortgages were up slightly, according to the Mortgage Bankers Association. The rate at which consumers are applying to refinance their home mortgages hit a new peak.
The bankers’ market composite index, which measures total loan origination volume, was up 4.9%. Refinances composed 82.4%, a full one-percent higher than the previous week as consumers showed they are trying to save as much as possible. Purchase applications were up 0.6% from a week ago, and down a mammoth 38.8% from the same week a year ago.
The fall-off in home purchase mortgage applications confirms a national trend of slower home sales following the expiration of the federal tax credit even as interest rates remain at historic lows. The average contracted rate on a 30-year fixed rate mortgage declined to 4.55% from 4.6% a week earlier. It was the lowest level the rate has reached in the history of the survey.
“Mortgage rates dropped to their lowest level in the survey going back to 1990 as incoming data continue to indicate that economic growth has slowed,” said Michael Fratantoni, MBA’s head of research and economics. “We are at a new 15 month high for the refinance index. With rates this low, many borrowers who refinanced in the past two years may well have an incentive to refinance again, and this is likely increasing refi application activity.”
Adjustable rate mortgages also composed a larger share of applications, rising a marginal one-tenth of one percent to just 5.8% of all applications as consumers shied away from adjustable loans