Applications to refinance home mortgages were higher last week than at any time in over three years according to the Mortgage Bankers Association (MBA).  The refinancing component of MBA's Market Composite Index, a measure of mortgage application volume, increased a full 2.0 percent on a seasonally adjusted basis during the week ended July 20.  This brought the Refinancing Index to a level last seen during the week ended April 19, 2009.  Applications for refinancing represented an 81 percent share of all loan applications for the week, up from 80 percent a week earlier.

The Composite Index rose 0.9 on both a seasonally adjusted and unadjusted basis, held back by the Purchase Index which fell 3 percent from the previous week.  MBA said that the Purchase Index was also down on an unadjusted basis but did not provide information relating it to the previous week or levels one year earlier.

Purchase Index vs 30 Yr Fixed

Refinance Index vs 30 Yr Fixed

While mortgage rates moved only slightly from week to week it was enough to establish three new historic lows and the effective rate of all loans decreased.  The average contract interest rate for conforming (balance of $417,500 or less) 30-year fixed-rate mortgages (FRM) was unchanged at 3.74 percent with points nudging down from 0.45 to 0.43.  The 30-year conforming FRM has been below 4 percent since the first week in May.  

The jumbo 30-year FRM (loan balance over $417,500) increased one basis point to 3.99 percent while points decreased from 0.32 to 0.28.  The conforming 15-year FRM established a new low, falling to 3.07 percent with 0.45 point from 3.12 percent with 0.48 point.  FHA-backed 30-year FRM decreased to a new low of 3.52 percent with 0.52 point from 3.55 percent with 0.44 point.

The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) decreased to 2.68 percent, the lowest rate in the history of the survey, from 2.71 percent, with points decreasing to 0.35 from 0.51.  ARMs had a 4 percent share of mortgage applications.  

Interest rate data is for loans with a loan-to-value ratio of 80 percent and points include the application fee.

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