The Mortgage Bankers Association (MBA) said that increases in applications for both FHA and VA mortgages were behind a jump in its Market Composite Index during the week ended October 16.  The index increased 11.8 percent on a seasonally adjusted basis compared to the week ended October 9.  On an unadjusted basis the index was up only 1 percent. The recent week's data included an adjustment to account for the Columbus Day holiday.

Applications for FHA mortgage increased to 14.3 percent of all applications from 12.6 percent the previous week and the VA share increased from 11.5 percent to 12.7 percent.  The USDA share of total applications also inched up to 0.6 percent from 0.5 percent the prior week.

"On an adjusted basis, application volume increased last week, led by a sharp rebound in government volume. We expect that application volume will remain volatile over the next few weeks as the industry continues to implement TILA-RESPA integrated disclosures," said Mike Fratantoni, MBA's Chief Economist.

The Refinance Index increased by 9 percent from the previous week although the refinance share of activity fell from 61.2 percent to 59.5 percent.  The seasonally adjusted Purchase Index was up 16 percent and the unadjusted index rose 5 percent from the week before and was 9 percent above its level during the same week in 2014.

Refinance Index vs 30 Yr Fixed

Purchase Index vs 30 Yr Fixed

Interest rates declined on both a contract and effective basis, with most reaching five or six month lows.  The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($417,000 or less) decreased to 3.95 percent, the lowest level since May, from 3.99 percent.  Points decreased from 0.53 to 0.43.  

Average rates for 30-year jumbo FRM (balances greater than $417,000) decreased to 3.87 percent, a level last seen in April, from 3.89 percent.  Points fell from 0.41 to 0.29.

The average contract interest rate for 30-year FHA-backed FRM eased by 4 basis points to 3.78 percent, the lowest level since May 2015.  Points were unchanged at 0.39.  

Fifteen-year FRM had a rate that averaged 3.20 percent, unchanged from the previous week, but points did dip to 0.34 from 0.39.

Adjustable rate mortgages (ARM) had a 6.9 percent share of the market during the week compared to 7.5 percent the week before.  The average contract interest rate for 5/1 ARMs decreased to 2.94 percent, the lowest level since May 2015, from 3.00 percent, with points decreasing to 0.35 from 0.46.

MBA conducts its Weekly Mortgage Application Survey with representatives of mortgage banks, commercial banks, and thrifts.  The survey, which has been conducted since 1990, covers over 75 percent of all U.S. retail residential mortgage applications.  Base period and value for all indexes is March 16, 1990=100 and interest rate data is based on loans with an 80 percent loan-to-value ratio.  Points include the origination fee.