Boosted by a surge in refinancing, lending applications rose for the week as mortgage rates hit a new low for the year, according to the Mortgage Bankers Association. The rate on a 30-year fixed mortgage dropped to an average 4.32% from 4.37% last week, setting a new low for 2011 on fully executed mortgage contracts.
The average rate on a 15-year fixed rate mortgage fell to 3.47% on an 80% loan to value mortgage. The shorter loan, which is growing in popularity for the first time in years also fell 0.05% and is at the lowest level in the history of the bankers’ survey.
The seasonally adjusted refinance index soared 8% from the prior week, but was still lower than a year ago when the federal tax credit for home buyers was winding down. But the four week moving average showed a positive sign for the marketplace, moving 10.1% higher, indicating both refinances and new home mortgage purchases are increasing as mortgage rates drop.
“Unprecedented volatility in the stock market last week amid additional signs that the economy has slowed led to further drops in mortgage rates,” said MBA chief economist Mike Fratantoni. “Purchase application activity fell sharply over the previous week, likely the result of potential homebuyers hesitant to purchase in this highly volatile and uncertain environment.”
The adjustable-rate mortgage share of activity dropped to just 5.8% from 6.1% of applications from the previous week. In September, the bankers’ weekly survey will be expanded to represent 75% of the retail lending market from the 50% it currently covers.
“That expanded sample showed a significantly larger increase in refinance applications than the current sample, with some lenders reporting increases in refinance applications in excess of 50% for the week,” Fratantoni said. “The big differences in refinance volumes were likely driven by the decisions of some lenders not to drop rates last week, largely due to the need to manage their pipelines.”