Big Jump in Mortgage Applications

The Mortgage Bankers Association (MBA) reported this morning that mortgage applications for last week increased by a seasonally adjusted 16.9% from the previous week. The unadjusted increase jumped by 46%.

An MBA spokesman said:

Refinance application volume increased last week to near peak levels for the year as mortgage rates dropped to a new low, driven down by growing concerns about the health of the US economy.

Refinancings rose 22% last week while new purchase applications fell by 0.1%. On an unadjusted basis, new applications rose more than 25%, about 3% lower than the previous week.

The average contract interest rate for a 30-year conforming loan fell to 3.74%, the lowest rate in the survey’s history. FHA-backed 30-year conforming loan rates fell to 3.55%, again the lowest since the survey was first conducted in 1990.

The average contract rate for a 15-year conforming loan fell to 3.12%, another record low, and the contract rate on a 30-year jumbo loan dropped to 3.98%, again a record. The 5/1 adjustable rate mortgage rate remained unchanged at last week’s record low of 2.71%.

Refinancings accounted for 80.1% of applications last week, up from 77% a week earlier, and the percentage of new loans that were ARMs fell to 4.1%.

The increased activity was greatest in the West South Central region and least in New England.

Like the price of gasoline, mortgage interest rates reflect the overall weakness of the U.S. economy. If the economy were in better shape, both gasoline and mortgages would cost more.

Paul Ausick