According to last week's ""mortgage applications survey"":http://www.mortgagebankers.org/NewsandMedia/PressCenter/68243.htm, published today by the ""Mortgage Bankers Association"":http://www.mortgagebankers.org (MBA), the number of applications for home loans jumped by nearly a third. The increase was spurred by a boost in refinance activity following the Federal Reserve's announcement last week to more than double its purchases of agency mortgage-backed securities (MBS) for the year, bringing the central bank's total commitment to $1.25 trillion.
The refinance share of mortgage activity last week increased to 78.5 percent of total applications, up from 72.9 percent the previous week. MBA's Refinance Index reflected an increase of 41.5 percent.
Orawin Velz, AVP of economic forecasting at MBA, explained that mortgage rates fell sharply to levels not seen in six decades following the Federal Reserve's announcement, offering a sizable refinance incentive for homeowners.
For the week ending March 20, 2009, MBA reported that overall mortgage loan application volume was up 32.2 percent on a seasonally adjusted basis. On an unadjusted basis, total mortgage volume increased 31.4 percent compared with the previous week and was up 18.0 percent compared with the same week last year.
MBA's survey also showed small increases in purchase applications. The seasonally adjusted Purchase Index increased 4.2 percent from one week earlier. The Conventional Purchase Index rose by 3.9 percent, and the Government Purchase Index, made up primarily of Federal Housing Administration (FHA) loans increased 4.6 percent.
Just yesterday, ""MBA announced"":http://dsnews.comindex.php/home/news_story/2740 that it is increasing its 2009 home loan forecast by over $800 billion, due entirely to the industry-wide hike in refinance activity. MBA now expects mortgage originations to total $2.78 trillion this year, and refinances alone to make up $1.96 trillion of that number. In addition to the Fed's aggressive, rate-lowering initiatives, MBA also attributed the flurry in refinancings, in part to the government-led refinance programs underway at Fannie Mae and Freddie Mac. Fannie Mae said last week that its refinancing volume in February was the largest seen in nearly a year.
MBA also reported on interest rates last week. The average contract rate for 30-year fixed-rate mortgages (FRMs) decreased to 4.63 percent (1.13 points) - the lowest MBA has recorded in the history of its weekly survey, which began in 1990.
The average contract interest rate for 15-year FRMs dipped to 4.48 percent (1.07 points), but for one-year adjustable-rate mortgages (ARMs), it increased to 6.22 percent (0.15 points), up slightly from 6.20 percent the week before. However, MBA reported that the ARM share of activity decreased to 1.4 percent of total applications, down from 2.0 percent the previous week.