Last week was the best one for mortgage applications in quite some time in terms of percent gains versus the previous week (outright index levels remain generally depressed, especially in the Refi Index).  The Mortgage Bankers Associations Market Composite Index, a measure of application volume, rose 4.7 percent during the week ended July 31 on a seasonally adjusted basis.  Unadjusted it was up 5.0 percent. 

The Refinance Index increased 6 percent from the previous week and the refinance share of mortgage activity rose to 51.3 percent from 50.6 percent. Both the seasonally adjusted and unadjusted Purchase Index were 3 percent above the previous week's level.  The unadjusted Purchase Index was up 23 percent compared to the same week in 2014.  It was the largest year-over-year gain since the 35 percent posted during the week ended November. 22, 2013, a week distorted by the Thanksgiving holiday.

Refinance Index vs 30 Yr Fixed

Purchase Index vs 30 Yr Fixed

"Despite recent concerns about the economy, both purchase and refinance applications increased strongly in response to lower interest rates last week," said Lynn Fisher, MBA's Vice President of Research and Economics. "Refinance activity was the highest since May when rates were last at this level. The increase in purchase activity was also notable for this time of year, up 23 percent relative to a year ago."

The share of all applications that were for FHA-backed loans increased to 13.8 percent from 13.7 percent while the VA share decreased to 10.5 percent from 10.9 percent. The share of USDA loan applications dipped 0.1 percent to 0.9 percent.

As MBA's Fisher said, the increased loan application activity was in reaction to further reductions in mortgage interest rates.  Contract rates were down for all tracked loan products, some to the lowest levels since May, and effective rates declined for those with fixed rates.

The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($417,000 or less) decreased to 4.13 percent, the lowest level since May 2015, from 4.17 percent.  Points declined to .34 from 0.36.

Jumbo 30-year FRM with jumbo loan balances (greater than $417,000) had an average rate of 4.08 percent, also the lowest level since May 2015, compared to 4.12 percent the previous week.  Points fell to 0.27 from 0.35.

FHA-backed 30-year FRM contract rates averaged 3.96 percent with from 3.98 percent, with points easing back to 0.22 from 0.26.  

The average contract interest rate for 15-year FRM decreased by 3 basis points to 3.36 percent, another three month low. Points were at 0.37 compared to 0.38 the prior week.

The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) also dropped to its lowest level since May, 3.02 percent, from 3.04 percent.  Points rose to 0.43 from 0.37 leaving the effective rate unchanged. The ARM share of applications increased to 6.8 percent from 6.6 percent.

MBA derives application volume and rate information from its Weekly Mortgage Application Survey which covers over 75 percent of all U.S. retail residential mortgage applications.  The survey has been conducted since 1990 among respondents including mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100.  Interest rate information presumes loans with 80 percent loan-to-value ratios and points include the origination fee.