Purchase Applications Decline, Refinance Applications Surge

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According to the Mortgage Bankers Association's (MBA) latest Weekly Mortgage Applications Survey for the week ending May 7, the Market Composite Index increased 3.9 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 3.4 percent compared with the previous week.

The Refinance Index increased 14.8 percent from the previous week and the seasonally adjusted Purchase Index decreased 9.5 percent from one week earlier.  The unadjusted Purchase Index decreased 8.9 percent compared with the previous week and was 0.6 percent lower than the same week one year ago.

"The recent plunge in rates on US Treasury securities, due to a flight to quality as investors worldwide sought shelter from the Greek debt crisis, benefitted US mortgage borrowers last week. Rates on 30-year mortgages dropped to their lowest level since mid-March.  As a result, refinance applications for conventional loans jumped, hitting their highest level in six weeks," said Michael Fratantoni, MBA's Vice President of Research and Economics.  "In contrast, purchase applications fell almost 10 percent in the first week following the expiration of the homebuyer tax credit, as the tax credit likely pulled some sales into April that would otherwise have occurred in May or later."

The four week moving average for the seasonally adjusted Market Index is up 4.4 percent.  The four week moving average is up 4.5 percent for the seasonally adjusted Purchase Index, while this average is up 4.4 percent for the Refinance Index.

The refinance share of mortgage activity increased to 57.7 percent of total applications from 51.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 6.3 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.96 percent from 5.02 percent, with points decreasing to 0.91 from 0.92 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.32 percent from 4.34 percent, with points increasing to 0.81 from 0.80 (including the origination fee) for 80 percent LTV loans. The effective rate also decreased from last week.

The average contract interest rate for one-year ARMs decreased to 6.86 percent from 7.03 percent, with points increasing to 0.35 from 0.28 (including the origination fee) for 80 percent LTV loans.

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