Mortgage Applications Reveal Burst Of Homebuying Activity

Mortgage applications for home purchases jumped 9.1 percent last week, suggesting buyers are beginning to return to the housing market. It was the best showing since early May.

Because the number of people refinancing existing mortgages dropped 2.5 percent, the overall Weekly Mortgage Applications Survey was down for the week.

"The increase in purchase activity was led by a 17.2 percent increase in FHA applications, while conventional purchase applications also increased by 3.6 percent," said Jay Brinkmann, MBA's Chief Economist.

"This is the second straight weekly increase in purchase applications and the highest Purchase Index level since the expiration of the homebuyer tax credit program. One possible driver of last week's big increase in FHA applications was a desire by borrowers to get applications in before new FHA requirements took effect October 4th, which included somewhat higher credit score and down payment requirements."

The refinance share of mortgage activity decreased to 78.9 percent of total applications from 80.7 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.1 percent from 6.0 percent of total applications from the previous week.

Falling rates

Meanwhile, record low interest rates continue to get lower. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.25 percent from 4.38 percent, with points decreasing to 1.00 from 1.01 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The 30-year contract rate is the lowest recorded in the survey, with the previous low being the rate observed last week. The effective rate also decreased from last week.