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Record-low mortgage rates lead to jump in refinancing
Average rate for 30-year mortgages now at 3.74%

by Jeb Bing

Mortgage applications increased 16.9% from one week earlier, according to data from the Mortgage Bankers Association's for the week ending July 13.

The Market Composite Index, a measure of mortgage loan application volume, increased 16.9% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 46% compared with the previous week.

The Refinance Index increased 22% from the previous week and is at the highest level since mid-June.

"Refinance application volume increased last week to near peak levels for the year as mortgage rates dropped to a new low, driven down by growing concerns about the health of the U.S. economy," said Mike Fratantoni, MBA's Vice President of Research and Economics. "Applications for HARP refinance loans accounted for 24% of refinance activity last week, in line with the HARP share for the past few weeks."

HARP is the government's Home Affordable Refinance Program.

The refinance share of mortgage activity increased to 80.1% of total applications, up from 77% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 4.1% of total applications.

In June, the number of both purchase and refinance applications increased the most in the West-South Central region, with a gain of 22.0% in purchase and 63.7% in refinance applications.

The region with the smallest increase in purchase applications was the New England region, growing by 9.4% while refinance applications increased the least in the Pacific region with a gain of 30.9%.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.74%, the lowest rate in the history of the survey, from 3.79%, with points increasing to 0.45 from 0.36 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 3.98%, the lowest rate in the history of the survey, from 4.05%, with points decreasing to 0.32 from 0.34 (including the origination fee) for 80% 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 3.55%, the lowest rate in the history of the survey, from 3.63%, with points increasing to 0.44 from 0.36 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.12%, the lowest rate in the history of the survey, from 3.15%, with points increasing to 0.48 from 0.43 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.

The average contract interest rate for 5/1 ARMs remained unchanged at 2.71%, matching the lowest rate in the history of the survey, with points increasing to 0.51 from 0.36 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.