Mortgage Application Volume Slumps as Refinance Activity Plummets

What a difference a week can make. According to the Weekly Mortgage Applications Survey released Wednesday by the ""Mortgage Bankers Association"":http://www.mbaa.org (MBA), mortgage application volume fell 2.9 percent for the week ending April 23, 2010, after surging 13.6 percent just one week earlier.

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A major drop in refinance applications was the culprit of this significant week-to-week change. From one week to the next, the refinance index tumbled 8.8 percent. As a result, the refinance share of mortgage activity fell to 55.7 percent of total applications, down from 60 percent the week prior.

It wasn't all bad news, though. The purchase index soared 7.4 percent from the previous week, reaching its highest level since October 2009. MBA said this increase was driven largely by the government purchase index, which jumped 11.9 percent from the week prior. During the same period, the conventional purchase index nudged up 3.5 percent.

""Purchase activity continues to increase as we approach the end of the homebuyer tax credit program,"" said Michael Fratantoni, MBA's VP of research and economics. ""Purchase applications were up almost 9 percent from a month ago, with a disproportionate share of the increase due to government purchase applications. Government applications for purchasing a home accounted for almost 49 percent of all purchase applications last week.""

Despite the notable increase in purchase activity, overall mortgage application volume fell due to the substantial decline in refinance activity, which was likely the result of a week-to-week jump in interest rates.

According to MBA, the average contract interest rate for 30-year fixed-rate mortgages increased to 5.08 percent from 5.04 percent the week before, and the average rate for 15-year fixed-rate mortgages inched up to 4.38 percent from 4.34 percent.