Mortgage Application Volume Jumps 3.9% as Refinance Activity Soars

Despite a plunge in purchase applications in the days following the expiration of the homebuyer tax credit, total

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mortgage application volume inched up 3.9 percent for the week ending May 7, 2009, due to a surge in refinance applications, the ""Mortgage Bankers Association"":http://www.mortgagebankers.org/default.htm (MBA) reported Wednesday.

According to MBA's Weekly Mortgage Applications Survey, the purchase index tumbled 9.5 percent from the week prior. Michael Fratantoni, MBA's VP of research and

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economics, said this drop in activity was likely the result of the homebuyer tax credit pulling some sales into April that would otherwise have occurred in May or later.

However, the slump in purchase applications was outweighed by a significant increase in refinance applications. Compared to the previous week, the refinance index soared 14.8 percent, bringing the refinance share of mortgage activity up to 57.7 percent of total applications from 51.9 percent one week earlier.

Refinance activity was bolstered by a week-to-week drop in interest rates. According to MBA, the average contract interest rate for 30-year fixed-rate mortgages decreased to 4.96 percent from 5.02 percent, and the average rate for 15-year fixed-rate mortgages fell to 4.32 percent from 4.34 percent.

""The recent plunge in rates on U.S. Treasury securities, due to a flight to quality as investors worldwide sought shelter from the Greek debt crisis, benefitted U.S. mortgage borrowers last week,"" Fratantoni said. ""Rates on 30-year mortgages dropped to their lowest level since mid-March. As a result, refinance applications for conventional loans jumped, hitting their highest level in six weeks.""