Low Rates Spur Interest in Refinancing

By:: Kara Johnson | July 07, 2010

Mortgage refinance applications rose more than 9 percent last week, as consumers sought to take advantage of interest rates that remained near record lows.

The Mortgage Bankers Association reported this morning that refinance applications last week rose to their highest level in over a year, while applications for home purchase mortgages continued to decline. Purchase applications fell 2 percent for the week, the eighth decline in nine weeks since the end of the federal homebuyer tax credits.

Overall mortgage applications were up 7 percent, the MBA reported. Refinance applications made up 78.7 percent of all applications, their highest share since April 2009 following the initial plunge in interest rates that spring.

“Mortgage rates remained near record lows last week, as incoming data on the job and housing markets were weaker than anticipated,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “As more homeowners locked in to these low rates, the level of refinance applications increased to a new 13-month high.”

Purchase applications, on the other hand, were down 15 percent for the month of June, compared to May, and were down 30 percent compared to April, the last month in which homebuyers could qualify for the federal tax credits.

Average interest rates on 30-year fixed-rate mortgage rose a single basis point, to 4.68 percent, up from 4.67 percent the previous week. However, the effective rate declined, as the average points paid, including origination fees, fell to 0.86 points from 0.96 points the week before.

Rates on 15-year fixed-rate loans rose to 4.11 percent from last week’s record low of 4.06 percent, with points decreasing to 0.93 from 0.97, resulting in an increase in the effective rate.

The survey covers 50 percent of all U.S. mortgage applications and is based on loans with an 80-percent loan-to-value ratio. The current survey covers the week ending Friday, July 2, 2010.

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