Mortgage Applications Surge in Last Week

The number of people applying for a mortgage jumped 16.6 percent last week, compared to the previous seven days, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey.

The numbers were driven mainly by current homeowners rushing to refinance their mortgages. MBA’s Refinance Index increased 20 percent from the previous week, hitting its highest level since April of 2009. The seasonally adjusted Purchase Index, which measures applications for loans to buy a home, increased four percent from one week earlier. The unadjusted Purchase Index also increased four percent compared with the previous week and was 11 percent higher than the same week one year ago.

While the report is not broken down for the Washington area, anecdotal evidence suggests local activity was as strong, if not stronger. A lot of the activity has occurred since the Federal Reserve announced its third round of Quantitative Easing on September 13. That’s had the effect of driving record low interest rates even lower.

“I think the reduction in rates has definitely had a stimulative effect,” said Bruce Gordon, of Virginia Heritage Mortgage in Chantilly. “Because of these lower rates people are refinancing and they’re buying homes.”

While Gordon has noticed an uptick in business since the Fed began its latest round of easing he also notes that already low rates had increased the flow of customers.

“We had our best August ever and September was also very strong,” Gordon said.

Because the Fed has committed itself to purchasing $40 billion of mortgage-backed securities each month, it’s pushing down rates and encouraging lenders to write more loans – a key step needed for continued recovery of the housing market.

Refinance share

In the last week the refinance share of mortgage activity increased to 83 percent of total applications from 81 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained at four percent of total applications.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.53 percent from 3.63 percent, with points decreasing to 0.35 from 0.41 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate decreased from last week, MBA said.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500 and a staple of the Fairfax County market) decreased to 3.82 percent from 3.87 percent, with points decreasing to 0.32 from 0.33 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.37 percent from 3.44 percent, with points decreasing to 0.36 from 0.41 (including the origination fee) for 80 percent LTV loans.  The effective rate decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 2.90 percent from 2.98 percent, with points decreasing to 0.27 from 0.41 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

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