Mortgage application activity eased slightly last week after reaching recent record high levels during the week ended September 29.  The Mortgage Bankers Association (MBA) said this morning that its Market Composite Index, a measure of loan application volume, decreased 1.2 percent on a seasonally adjusted basis during the week ended October 5.  On an unadjusted basis it was down 1.0 percent.  It had surged over 16 percent the previous week.

The Refinancing Index, which had driven the earlier activity, was down 2 percent although the refinance share of mortgage activity remained unchanged at 83 percent.  The seasonally adjusted Purchase Index was up 2 percent and the unadjusted index increased 3 percent from the previous week and was 12 percent higher than during the same week in 2011.

Refinance applications declined somewhat last week although volume is still near three-year highs, and purchase applications increased to the highest level since June, with both conventional and government volumes increasing," said Mike Fratantoni, MBA's Vice President of Research and Economics.  "Rates on 30-year fixed-rate loans remain historically low, benefitting both prospective homebuyers and those seeking to refinance."

Purchase Index vs 30 Yr Fixed

Refinance Index vs 30 Yr Fixed

Interest rates were mixed.  The average contract rate for a conforming 30-year fixed-rate mortgage (FRM) with a balance of $417500 or less increased to 3.56 percent with 0.39 point from 3.53 percent with 0.35 point and the effective rate also increased.  This was the first increase for the contract rate after six straight weeks of decline. 

The jumbo 30-year FRM (balances over $417,500) decreased to 3.74 percent, the lowest rate in the history of the survey, from 3.82 percent the previous week.  Points increased to 0.40 from 0.32 and the effective rate decreased.

FHA-backed 30-year FRM also hit a new low at 3.34 percent, down from 3.37 percent although points jumped to 0.71 from 0.36 and the effective rate increased.  The 15-year FRM also set a new low at 2.88 percent compared to 2.90 percent a week earlier, but again fees were up from 0.27 to 0.40 and the effective rate increased.

The average contract rate for 5/1 adjustable rate mortgages (ARMs) increased one basis point to 2.60 percent and points increased from 0.34 to 0.36.  The effective rate also increased.  The ARM share of activity decreased to 3.9 percent of total applications, matching the lowest level since December 2009.

Rates are based on a loan-to-value ratio of 80 percent and fees include the application fee.

MBA's Weekly Mortgage Applications Survey from which the data is derived 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.  The base period and value for all indexes is March 16, 1990=100.