The Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey reported that mortgage applications as measured by its Market Composite Index were down 2.9 percent on a seasonally adjusted basis during the week ended January 27 but increased 9.0 percent from the previous week on an unadjusted basis.

The seasonally adjusted Purchase Index was down 1.7 percent while it increased 17.1 percent on an unadjusted basis from the week ended January 20 and was 4.3 percent lower than during the same week in 2011.  The Refinance Index decreased 3.6 percent from the previous week.

All of the four week moving averages were higher for the week.  The seasonally adjusted Market Index rose 4.11 percent, the seasonally adjusted Purchase Index was up 2.48 percent and the Refinance Index increased 4.22 percent.

Applications for refinancing represented 80.0 percent of all applications, down from 81.3 percent the previous week.  Applications for adjustable-rate mortgages (ARMs) had a 5.6 percent market share compared to 5.3 percent a week earlier.

Refinancing applications in December increased in every U.S. state according to MBA and, despite multiple holidays only 12 states had fewer purchase applications than in November.  In Connecticut refinancing applications increased 80.1 percent from November and Maine saw a 30.8 percent increase in applications for home purchase mortgages.

Purchase Index vs 30 Yr Fixed

Refinance Index vs 30 Yr Fixed

Rates fell for all fixed rate mortgages (FRM) compared to the previous week.  The average contract interest rate for 30-year conforming FRM (balances under $417,500) decreased to 4.09 percent with 0.41 point from 4.11 with 0.47 point. Rates for jumbo mortgages (those with balances over $417,500) decreased from 4.39 percent to 4.33 percent while points increased from 0.40 to 0.41.  This is the lowest rate for the 30-year jumbo mortgages since MBA started tracking them one year ago. 

FHA backed 30-year FRM rates decreased one basis point to 3.96 percent with points increasing to 0.61 from 0.57.  Rates for the 15-year FRM were down from 3.40 percent with 0.40 point to 3.36 percent with 0.41 point.  The effective rate of all of the mortgage products listed above also decreased.

The sole rate increase was for the 5/1 ARM which increased on average to 2.94 percent with 0.39 point from 2.91 percent with 0.41 point.  The effective rate also increased. 

Follow what drives changes in mortgage rate each day with Mortgage Rate Watch from MND.

All rates quoted are for 80 percent loan to value loans and points include the origination fee.

Michael Fratantoni, MBA's Vice President of Research and Economics said of the week's results, "The Federal Reserve surprised the market last week by indicating that short-term rates were likely to stay at their current low-levels until the end of 2014.  Longer-term treasury rates dropped in response, and mortgage rates for the week were down slightly as a result.  Although total application volume dropped on an adjusted basis relative to last week, refinance volume remains high, with survey participants reporting that the expanded Home Affordable Refinance Program (HARP) contributed to roughly 10 percent of their refinance activity."

MBA's weekly survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted since 1990.  Respondents include mortgage bankers, commercial banks and thrifts.  Base period and value for all indexes is March 16, 1990=100.