By Mike Colpitts
Driven by an increase in home purchases, mortgage applications picked up for the week as buyers took advantage of record low 
mortgage rates, according to the Mortgage Bankers Association.
The sharp increase in home sales accounted for an 8.1% rise in mortgage applications after the holiday week placed by home buyers for the week ending January 6th. Mortgage interest rates hit an average of 3.91% on the 30-year fixed rate mortgage, according to Freddie Mac to equal their lowest level on record during the period.
But the Mortgage Bankers Association says that rates home buyers are locking in are a bit higher, averaging 4.11% on a 30-year fixed rate loan. The discrepancy in rates is attributed to mortgage buyers with less than perfect credit obtaining mortgages at higher rates. Lenders often approve home mortgages for those able to borrow from banks and mortgage companies at higher rates as a result of credit issues.
The refinance share of applications rose only 3.3% for the week, but still makes up the largest percentage 
of mortgage activity, declining to 80.8% of all applications by home borrowers.
The rate on government backed FHA mortgages finalized by borrowers, however, was much lower for the week, averaging 3.96% on a 30-year fixed rate loan. An increasing share of homeowners seeking refinances and home purchases are taking out FHA loans for their lower mortgage rates and easier qualifying standards.
The contracted interest rate on a 15-year fixed rate mortgage increased slightly for the week to 3.40% on finalized transactions, with points dropping to 0.37 from 0.50 a week earlier. The average contracted rate on a 5/1 adjustable rate mortgage declined to 2.90% from 2.91% a week ago.