Applications for refinancing cratered last week, reaching their lowest level in four months according to the Mortgage Bankers Association's (MBA's) Weekly Mortgage Applications Survey. MBA's Refinance Index dropped by 8 percent during the week ended May 1, the largest single-week decrease in over two months, to its lowest level since January.  The refinancing share of applications was at 53 percent for the week, two percentage points lower than the previous week.

Applications for home purchases did increase but not by enough to offset the decline in refinancing.  MBA's Market Composite Index, a measure of overall mortgage application volume fell 4.6 percent from the week ended April 24 on a seasonally adjusted basis and was down 4.0 percent on an unadjusted basis.  The Purchase Index increased by 1 percent from the previous week reaching its highest seasonally adjusted level since June 2013.  It was up 2 percent on an unadjusted basis was 12 percent higher than during the same week in 2015. The average size of a purchase loan rose to a survey high of $297,400.

Refinance Index vs 30 Yr Fixed

Purchase Index vs 30 Yr Fixed

 Mike Fratantoni MBA's Chief Economist said, "Refinance volume dropped last week as rates in the US increased sharply towards the end of the week, with signs of recovery in Europe lifting rates across the globe. Purchase activity increased slightly over the week, and the average loan amount for a purchase application reached a record high, a sign that the mix of purchase activity is still skewed toward higher priced homes."

The FHA share of total applications increased to 14.0 percent compared to 13.7 percent from the previous week while the VA share rose to 11.9 percent from 11.3 percent. The USDA share of total applications was unchanged at 0.8 percent.

Rates were higher across the board for fixed rate mortgages and all mortgage types saw an increase in effective rates.  The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($417,000 or less) increased to 3.93 percent from 3.85 percent, with points remaining at 0.35.

Jumbo 30-year FRM saw an average rate increase of 9 basis points to 3.91 percent.  Points dipped from 0.31 to 0.24.

The average contract interest rate for 30-year FRM backed by the FHA increased to 3.70 percent from 3.66 percent. Points increased to 0.21 from 0.16.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.19 percent from 3.14 percent, with points easing to 0.30 from 0.31.  

The average rate for 5/1 adjustable rate mortgages (ARMs) dipped one basis point to 2.87 percent and the effective rate increased along with a .05 increase in points to 0.33.  Still the share of mortgage applications for ARMs rose from 5.7 to 6.1 percent, the first time the share of these loans had breached 6.0 percent this year.

MBA's 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. The base period and value for all mortgage application indexes is March 16, 1990=100 and interest rate quotes presume an 80 percent loan to value ratio.  Points include the origination fee.