Refi business is picking up on falling mortgage rates

Mortgage applications shot up 15.6% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) weekly application survey for the week ending June 7.

On an unadjusted basis, the market composite index increased 26% compared with the previous week. The refinance index increased 28% from the previous week and was also 28% higher than the same week one year ago. The seasonally adjusted purchase index increased 9% from one week earlier. The unadjusted purchase index increased 19% compared with the previous week but was still 12% lower than the same week one year ago.

“Mortgage rates were trending lower over the course of last week until a stronger than anticipated employment report resulted in a bounce back, with the weekly average for the 30-year fixed mortgage rate decreasing to 7.02%,” said Mike Fratantoni, MBA’s SVP and chief economist in a statement. “Lower rates earlier in the week meant a strong increase in refinance activity, particularly for VA borrowers, who jumped on the chance to lower their rates. Overall refinance activity was more than 27% above one year ago.”

He added: “On a seasonally adjusted basis and compared to the holiday-adjusted level from the prior week, purchase activity also increased. Multiple data sources are now indicating that home inventory levels, while still historically low, are up significantly from last year at this time. This is good news for many prospective homebuyers who have been frustrated by the lack of homes on the market.”

The refinance share of mortgage activity increased to 35.2% of total applications from 31.1% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.3% of total applications.

The FHA share of total applications decreased to 13.1% from 13.2% the week prior but the share of VA applications rose to 14.7% from 12.1% from the prior week.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 7.02% from 7.07%, with points unchanged at 0.65 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.

The average contract interest rate for 5/1 ARMs increased to 6.45% from 6.37% with points increasing to 0.81 from 0.63 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.