Record low interest rates prompted a surge in mortgage applications during the week ended September 28.  The Mortgage Bankers Association (MBA) said that its Market Composite Index, a measure of application volume, had the largest single week increase in more than three years, rising 16.6 percent on a seasonally adjusted basis from the week ended September 21.  On an unadjusted basis the Index was up 17 percent.

Refinancing applications drove the Index.  The Refinancing Index was up 20 percent to the highest level recorded in the MBA's Weekly Applications Survey since April 2009.  Eighty-three percent of all mortgage applications were for refinancing compared to 81 percent the previous week.  HARP refinancing as a share of all refinancing applications decreased to 23 percent last week from 26 percent the prior week.

The seasonally adjusted and the unadjusted Purchase Indices were both up 4 percent from the previous week.  The unadjusted Index was 11 percent higher than during the same week in 2011.   

"Refinance application volume jumped to the highest level in more than three years last week as each of the five mortgage rates in MBA's survey dropped to new record lows in the survey," said Mike Fratantoni, MBA's Vice President of Research and Economics. "Financial markets continue to adjust to QE3, as the ongoing presence of the Federal Reserve as a significant buyer of mortgage-backed securities applies downward pressure on rates.  Although there was a slight decline in the HARP share of refinance activity, the level of HARP volume remains steady."

Purchase Index vs 30 Yr Fixed

Refinance Index vs 30 Yr Fixed

All contract mortgage rates and effective rates tracked by the MBA survey were down for the week, setting new survey records.  The average contract rate for 30-year fixed-rate mortgages (FRM) with conforming balances of $417,500 or less dropped 10 basis points to 3.53 percent with points decreasing to 0.35 from 0.41.  Rates for the jumbo version with balances over $417,500 decreased to 3.82 percent with 0.32 point from 3.87 percent with 0.33 point. 

FHA-backed 30-year FRM decreased to 3.37 percent from 3.44 percent and points dropped to 0.36 from 0.41.  

The average contract interest rate for 15-year fixed-rate mortgages decreased to 2.90 percent from 2.98 percent, with points decreasing to 0.27 from 0.41

The average contract interest rate for 5/1 ARMs decreased to 2.59 percent from 2.61 percent, with points decreasing to 0.34 from 0.41. The adjustable-rate mortgage (ARM) share of activity remained at 4 percent of total applications.

Interest rates quoted from the survey are for loans with an 80 percent loan-to-value ratio and points include the application fee.

MBA's weekly 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.