The ""Mortgage Bankers Association"":http://www.mortgagebankers.org (MBA) reported Wednesday that its index of mortgage application volume climbed 4.9 percent for the week ending August 20.
[IMAGE]Refinance activity was the driving force behind the increase. Record-low interest rates are prompting existing homeowners to take out new loans and lower their monthly mortgage payments.
MBA's refinance index increased 5.7 percent last week compared to the previous week and is at its highest level since May 1, 2009. Refis now claim 82.4 percent of the total mortgage applications, the highest share observed since January 2009.
[COLUMN_BREAK]Michael Fratantoni, MBA's VP of research and economics, pointed out that the volume of refi applications last week was up 26 percent over their level four weeks ago, demonstrating the recent surge lenders are seeing from homeowners looking to cash in on the lowest mortgage rates in a half century.
""We are at a new 15-month high for the refinance index,"" Fratantoni said. ""With rates this low, many borrowers who refinanced in the past two years may well have an incentive to refinance again, and this is likely increasing refi application activity.""
According to MBA's study, mortgage rates dropped even lower last week. The trade group reported that the average contract interest rate for 30-year fixed-rate mortgages decreased to 4.55 percent from 4.60 percent. This was the lowest 30-year contract rate ever recorded by MBA.
Rates for 15-year fixed-rate mortgages also fell to the lowest level MBA has ever documented, decreasing to 3.91 percent from 3.99 percent the week prior.
With no additional lure â€" such as an $8,000 or $6,500 tax credit â€" rock-bottom rates, though, are doing little for new sales transactions. MBA's home purchase index inched up only a slight 0.6 percent from the week before. The trade group says sales application volume is nearly 40 percent lower than this time last year.