By Kevin Chiu
The volume of applications for home mortgages jumped higher for the week as mortgage rates dropped, according to the Mortgage Bankers Association. 
The composite index, a figure compiled from both new purchase applications and refinances jumped 8.2%.
Refinancing led applications as homeowners with mortgages they were trying to get a lower rate on saw declining rates as the time to lock-in rates. Refinances increased 9% from the previous week, and are at their highest level since mid-March. Purchase applications had a jump of 6.7% for the week.
The average rate on a fully executed 30-year fixed rate mortgage dropped to 4.67% from 4.76% a week earlier, according to the bankers’ survey to reach the lowest level since last December. The bankers association survey accounts for about half of all U.S. home mortgage activity. The rate on a 15-year fixed loan also had a drop to 3.81% from an average of 3.96% from a week ago.
“Rates dropped again last week as the Federal Reserve continued its QE2 asset purchase program,” said Michael Fratantoni, MBA’s Vice President of Research. “The 30-year fixed mortgage rate is now 46 basis points below its 2011 peak, and has decreased for four straight weeks by a total of 31 basis points.”
The Federal Reserve has said it would halt its program to purchase mortgages sometime in June, which could have a negative impact on home mortgage rates, triggering them to rise substantially.
Refinances, however, seem to have reached their peak last fall when interest rates hit their record low in October. “Over this four week span, the refinance index has increased by about 18%. Despite the recent increases however, refinance application volumes remain more than 50% below levels seen last fall,” said Fratantoni.
The four week moving average for the seasonally adjusted market index also saw a jump of 2.9%, indicating a positive move for home sales and refinancing as the spring home buying season moves into high gear.
The refinance share of mortgage activity rose to 63.1% of applications from 62.7% last week, reaching its highest level since last March.
An increase in home sales activity is being driven by a combination of near record low mortgage rates and lower home prices, nearly 40% of which are heavily discounted foreclosure and bank-assisted short sales.