The two sides of the mortgage market have been headed in opposite directions lately, with applications for home purchase mortgages increasing even as refinance demand has declined.

Applications for mortgages to buy a home were up a seasonally adjusted 4.4 percent last week and have increased by 12 percent over the past month, according to figures released today by the Mortgage Bankers Association.

At the same time, mortgage refinance applications fell by 4.1 percent for the week for the fourth consecutive weekly decline. Refinance applications have dropped an average of 3.29 percent a week over that period.

HARP activity increasing

The drop in refinance demand has occurred despite mortgage rates holding steady near historic lows and recent changes to the government's Home Affordable Refinance Program (HARP) that are designed to make it easier for underwater homeowners to refinance their mortgage.

However, HARP refinances have been increasing as a share of mortgage refinance volume, according to MBA economist Mike Frantoni, making up nearly one-third of refinance applications over the past two weeks.

Refinances made up 75.1 percent of all mortgage applications last week, down from 77.0 percent the week before.

Rates hold steady

Mortgage rates generally held steady last week, with some variation among different loan types. Average interest rates on conforming 30-year fixed-rate mortgages (balances below $417,500) and 15-year fixed-rate mortgages were unchanged at 4.06 percent and 3.36 percent, respectively, with small declines in origination points to 0.43 points and 0.34 points, respectively.

The biggest change was on 30-year fixed-rate FHA mortgages, where average interest rates fell to 3.82 percent, down from 3.87 percent the week before, with origination fees falling to 0.55 points, down from 0.70 percent the week before. The drop appears to be related to recently announced reductions in fees for FHA streamlined mortgage refinances.

Average interest rates on jumbo mortgages (above $417,500) rose to 4.39 percent, up from 4.33 percent the week before, with origination fees barely down slightly to 0.39 points. Meanwhile, average initial rates on 5/1 adjustable rate mortgages (ARMs) rose to 2.81 percent, up from 2.78 percent previously, with origination costs rising slightly to 0.37 points.

All rates on based on mortgages with an 80 percent loan-to-value ratio. Figures are for the week ending Friday, March 9.

Published on March 14, 2012