Demand for mortgage refinancing has hit its highest level in
more than three years as mortgage rates continued to plunge in the
wake of the Fed's announcement of a third round of economic
Applications to refinance an existing mortgage jumped 20 percent
last week, according to today's figures from the Mortgage Bankers
Association (MBA). It was the strongest week for mortgage
refinancing since April 2009.
The sharp rise in refinance demand comes as average rates on
standard 30-year mortgages have fallen two-tenths of a percentage
point since the Fed announced on Sept. 13 that it would undertake a
third round of "qualitative easing."
Applications for home purchase mortgages increased as well,
rising a seasonally adjusted 4 percent over the previous week and
showing an 11 percent annual gain over the same week one year
All rates reach new record lows
All five types of mortgage rates covered by the MBA survey fell
to new all-time lows last week, led by standard 30-year fixed-rate
loans, which fell to an average of 3.53 percent, down from 3.63
percent the week before. Prior to the Fed's announcement on Sept.
13, 30-year loans were averaging 3.75 percent in the MBA
MBA economist Mike Fratantoni said the decision by the Federal
Reserve to increase its purchases of mortgage-backed securities is
putting downward pressure on mortgage rates. Similar action by the
Fed triggered a flood of refinance applications in April 2009 when
the first round of qualitative easing sent 30-year rates below the
5 percent mark for the first time in half a century.
Big drop in 15-year rates
Interest rates on 15-year fixed-rate mortgages, popular with
those who are refinancing, also posted a big drop last week,
falling to an average of 2.90 percent in the MBA survey, down from
2.98 percent the week before.
The average on 30-year FHA fixed-rate mortgages dropped to 3.37
percent, down from 3.44 percent previously, while 30-year
fixed-rate jumbo mortgages (balances exceeding $417,500) fell to
3.82 percent, down from 3.87 percent the week before.
A small decline was seen in initial rates for 5/1
adjustable-rate mortgages (ARMs), which decreased to 2.59 percent,
down from 2.61 percent the week before.
All rates are based on mortgages with an 80 percent
loan-to-value ratio. The weekly MBA survey covers approximately
three-quarters of the U.S. residential mortgage market.
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