By Mike Colpitts
Mortgage applications soared as mortgage rates dropped to the lowest level on fully executed home loans in weeks, according to the Mortgage Bankers Association. It was the second straight week rates had seen a drop to drive an increase in loan applications.
Bankers reported an increase of 10.3% in application volume from one week earlier. Refinancing out-paced purchase applications to compose the majority of activity, and the number of mortgage applications for purchases seems to be moving in a positive direction.
The 30-year fixed rate mortgage saw a dive to 4.22% on conventional home loans from 4.31% on fully executed lender contracts last week. The drop in mortgage interest rates set by banks and other lenders could provide better signs for the housing market as it struggles to find a bottom in many regions of the country.
“Treasury rates dropped last week, as renewed turmoil in Europe once again led to a flight to quality, and 30-year mortgage rates dropped to their second lowest level of the year,” said Mike Fratantoni, MBA’s Vice President of Research and Economics. “Refinance applications jumped more than 12% to their highest level in a month and some lenders experienced even larger increases.”
After three consecutive weeks of dropping, refinances increased to make up 78.6% of all applications from 77.1% a week earlier. Adjustable rate loans make up just a small fraction of lender loan commitments.
Homeowners who are finalizing contracts to refinance mortgages are opting to refinance and deleverage their home loans in greater numbers selecting fixed 15-year rate mortgages. The move is an unprecedented act for U.S. homeowners who are seeking to reduce their mortgage balances and retain greater security in their homes as a result of seeing so many of their friends and neighbors lose their homes to foreclosure.
The average contract interest rate on 15-year fixed rate loans dropped to 3.54% from 3.63% on 80% loan-to-value mortgages. The rate on the average 5-year adjustable rate mortgage also saw a drop to 3.01% from 3.09% a week ago.