June 9, 2010 Update: Mortgage Applications Index Takes 12.2% Dive, Despite Low Rates
A national index that measures mortgage applications for the purchase of a home last week fell to a 13-year low, while refinancing activity continues to surge.
The seasonally adjusted purchase index compiled by the Mortgage Bankers Associations decreased 3.3 percent last week to the lowest level the survey has seen since April 1997.
The refinance index shot up 17 percent from the previous week, its highest point since October 2009 and the third consecutive weekly increase.
Economic crises throughout Europe is helping keep mortgage rates historically low, prompting the refinancing interest. Analysts, though, see continued weak sales activity as the housing market enters the summer season. The lack of home-buying tax incentives – such as the tax credits that expired April 30 – is one reason for the anticipated slump.
“Refinance application volume jumped last week as continuing financial market turmoil related to the budget crises in Europe extended the opportunity for homeowners to lock in at historically low mortgage rates,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “In contrast, purchase applications fell further this week, following last week’s sharp decline, keeping the purchase index at 13-year lows.”
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.80 percent from 4.83 percent last week, for 80 percent loan-to-value (LTV) ratio loans. This is the lowest 30-year fixed-rate recorded in the survey since the week ending November 27, 2009.
The MBA survey covers more than 50 percent of all U.S. retail residential mortgage applications. It has been conducted weekly since 1990.
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