Applications for government-backed mortgages dropped significantly during the week ended April 5, but mortgage activity in other sectors was strong.  The Mortgage Bankers Association's (MBA) Market Composite Index, a measure of application volume, increased 4.5 percent on a seasonally adjusted basis from the week ended March 29 and 5 percent on an adjusted basis.

Mike Fratantoni, MBA Vice President of Research and Economics noted that there had been a significant divergence between the conventional and government markets during the week.  "Following the April 1 increase in FHA mortgage insurance premiums, government purchase applications fell by almost 14 percent, to their lowest level since February 2013.  On the other hand, applications for conventional purchase loans increased by more than 5 percent, bringing the conventional purchase index to its highest level since October 2009 and the highest level since the expiration of the homebuyer tax credit.  With these changes, the government share of all purchase loans fell to 30 percent, the lowest level since we began tracking this series in 2011."

The increase in conventional purchase mortgage applications was not enough to offset the FHA effect however, and both the seasonally adjusted and the unadjusted Purchase Index decreased 1 percent from the previous week although the seasonally adjusted index was 3 percent higher than in the same week in 2012. 

The Refinance Index was up 6 percent from the previous week and the refinance share of mortgage activity increased to 75 percent of total applications from 74 percent. Thirty percent of applications for refinancing were for Home Affordable Refinance Program (HARP) mortgages compared to 28 percent the previous week.

Purchase Index vs 30 Yr Fixed

Refinance Index vs 30 Yr Fixed

MBA's Weekly Mortgage Application Survey also captured average interest rates for loans with an 80 percent loan-to-value ratio.  Contract rates for all fixed -rate mortgages declined to their lowest rates since January and effective rates were down for all products surveyed. 

The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($417,500 or less) decreased to 3.68 percent from 3.76 percent, with points, which in all cases included the origination fee, remaining unchanged at 0.43. The rate for 30-year FRM with jumbo loan balances (greater than $417,500) decreased to 3.79 percent, from 3.85 percent, with points decreasing to 0.36 from 0.37. 

Contract rates for 30-year FHA-backed FRM dropped 5 basis points to 3.43 percent while points jumped to 0.52 from 0.38.  

The 15-year FRM had an average contract rate of 2.92 percent with 0.34 point compared to 2.99 percent with 0.36 point one week earlier.  

The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) decreased to 2.58 percent from 2.60 percent, with points increasing to 0.37 from 0.32.  The ARM share of the market eased slightly to 5 percent of total applications.   

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