Mortgage Rates Down, Applications Up

By:: Kara Johnson | April 21, 2010

Mortgage applications surged last week, as borrowers sought to take advantage of a drop in interest rates and qualify for a soon-to-expire homebuyer tax credit.

Applications for mortgages of all types were up by 13.6 percent for the week ending Friday, April 16, according to the current weekly survey released today by the Mortgage Bankers Association. The increase was driven by a 15.1 percent increase in applications to refinance existing mortgages, while applications for home purchase mortgages rose 10.1 percent. All figures are seasonally adjusted.

"Treasury rates fell last week causing a decline in mortgage rates. As a result, refinance applications picked up over the week, as some borrowers took advantage of this recent rate volatility to lock in a low fixed-rate loan," said Michael Fratantoni, MBA Vice President of Research and Economics. "Purchase applications continued to increase coming out of the Easter holiday, as we approach the end of the homebuyer tax credit, and are up modestly over last month."

Mortgage rates briefly surged after the first of the month, following the end of the Treasury Department’s program of purchasing mortgage-backed securities. Interest rates had been widely predicted to increase following the end of the program, so consumers may have seen their subsequent decline over the past two weeks as a final opportunity to lock in a low-rate loan.

Rates on 30-year fixed-rate mortgages declined to 5.04 percent in the current MBA survey, down from 5.17 percent last week and 5.31 percent two weeks ago. The average rate on 15-year fixed-rate loans was down to 4.34 percent, compared to 4.45 percent last week. Both current rates were based on 80-percent loan-to-value rations with 0.98 points paid, including origination fees.

Homebuyers are also moving to finalize sales agreements in advance of an April 30 deadline to qualify for either an $8,000 first-time homebuyer tax credit or $6,500 repeat buyer credit. Borrowers have until June 30 to complete financing on purchase agreements finalized by the deadline.

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