Mortgage Volume Jumps on Lower Interest Rates

Mortgage volume jumped last week to the largest level in four months as low interest rates mortgage application drove homeowners to refinance loans, according to the Mortgage Bankers Association. The upbeat news is likely to spur more refinancing activity this week.

The bankers’ composite index, a combination of refinances and new home mortgages rose 15.5% on a seasonally adjusted basis from the previous week. Refinances had a jump of 23.1% as refinancing took 70.1% of application volume across the country, reaching the highest level since January, the bankers’ survey indicated. But purchase applications declined a slim 0.1% for the same week.

However, applications for new home purchases were still 8.3% higher than a year ago when the federal tax credit for home buyers was still in effect.

sold home

The average fully executed contract mortgage interest rate on a 30-year fixed rate mortgage declined to 4.54% from 4.55% on 80% loan-to-value ratio loans. The average interest rate for 15-year fixed rate mortgages decreased to 3.66% from 3.68%.

“Ongoing turmoil in the financial markets primarily due to the sovereign debt crisis in Europe has brought mortgage rates back to their lowest levels of the year,” said MBA chief economist Michael Fratantoni.

“Refinance applications have surged in response and the refinance index is at its second highest level of the year. One factor that may be contributing to this increase is that borrowers potentially impacted by impending decreases in the conforming loan limit may be opting to lock in fixed rate financing now.”

The adjustable-rate mortgage share of activity increased to 5.8% from 5.5% of applications from a week earlier.