Pre-Fiscal Cliff Refinancing Spurs Jump in Mortgage Applications

Plenty of uncertainty about higher taxes for potential borrowers this Jan.1 helped fuel a jump in mortgage applications last week, according to the Mortgage Bankers Association.
The bankers’ Refinance Index increased 8 percent from the previous week to its highest level since the week ending October 12, 2012.
The refinance share of mortgage activity increased to 84 percent of total applications, from 82 percent the previous week.
The HARP share of refinance applications increased to 29 percent from 27 percent the prior week. HARP (Home Affordable Refinance Program) is the Obama Administration’s recently  expanded effort to help borrowers deeply “underwater” on their mortgages.
Mortgage applications for purchases increased for a fifth consecutive week, and are running almost ten percent above their level at this time last year.
Overall, mortgage applications increased 6.2 percent from one week earlier, according to data the bankers’survey for the week ending December 7, 2012.
“Continued uncertainty due to the lack of resolution regarding the fiscal cliff led interest rates lower last week, with mortgage rates reaching a new low in our survey,” said Mike Fratantoni, MBA’s Vice President of Research and Economics.  “Refinance activity increased, with the refinance index hitting its highest level in two months, and the refinance share reaching its highest level since January 2009.”
The average contract interest rate for 30-year fixed-rate mortgages, with conforming loan balances ($417,500 or less), decreased to 3.47 percent, the lowest rate in the history of the survey, from 3.52 percent for 80 percent loan-to-value ratio (LTV) loans.
The average contract interest rate for 30-year fixed-rate mortgages, with jumbo loan balances (greater than $417,500), decreased to 3.77 percent, from 3.79 percent, for 80 percent LTV loans.
The average contract interest rate for 30-year fixed-rate mortgages backed by the Federal Housing Administration (FHA) decreased to 3.32 percent, the lowest rate in the history of the survey, from 3.34 percent, for 80 percent LTV loans.  The effective rate decreased from last week.

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