Home Purchases Move Higher

By Kevin Chiu

New home purchases moved higher for the week as indicated by an increase in happy couple mortgage applications, while refinances dropped, according to the Mortgage Bankers Association.

The seasonally adjusted purchase index had a 6.7% rise to its highest level of the year as warmer spring time weather made it more comfortable for home buyers to venture out in many parts of the country. The Government Purchase Index jumped 10.3%, also to its highest level of 2011.

However, refinancing took a beating for the week, dropping 6.2% to its lowest level in almost six weeks as mortgage rates moved slightly higher. The rate on a fixed 30-year mortgage moved to an average of 4.93% on a closed transaction, a slight .01 uptick from last week.

Rates have been on a gradual increase over the past month as uncertainty triggered by unrest in the Middle-East and economic troubles abroad weaken financial markets. The average contracted rate on a 15-year fixed rate loan declined to 4.14% from 4.16% a week earlier.

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“Purchase application volume increased last week reaching the highest level of the year, but remains relatively low by historical standards, at levels last seen in 1997,” said Michael Fratantoni, MBA’s chief economist. “The increase last week was due to a sharp increase in applications for government loans. Borrowers were likely motivated to apply before a scheduled increase in FHA insurance premiums that became effective last Friday.”

The pool of homeowners considering a refinance is shrinking with borrowers who have both the incentive and the ability to qualify for refinancing.

The refinance share of mortgage activity also dropped to 61.2% of applications from 64.3% a week ago. It’s the lowest refinance share since last May. Adjustable-rate mortgage (ARM) activity rose to 6.1% of all applications from 5.7% the previous week.