MBA Sees Sharp Jump in Purchase Activity Led by FHA Loan Apps

The ""Mortgage Bankers Association's"":http://www.mortgagebankers.org (MBA) index of loan applications for home purchases jumped 9.3 percent last week as mortgage interest rates dropped again.
[IMAGE] It's the highest reading for purchase activity observed in the trade group's survey since the expiration of the homebuyer tax credit, and could signal a rebound in home sales ahead.

MBA Chief Economist Jay Brinkmann explained that the increase in the purchase index was led by a 17.2 percent

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upsurge in Federal Housing Administration (FHA) loan applications, but conventional purchase applications also increased by 3.6 percent.

""This is the second straight weekly increase in purchase applications,"" Brinkmann said. ""One possible driver of last week's big increase in FHA applications was a desire by borrowers to get applications in before new FHA requirements took effect October 4th, which included somewhat higher credit score and down payment requirements.""

While purchases applications got a healthy boost, MBA's refinance index dropped 2.5 percent for the week ending October 1. With refinances accounting for 78.9 percent of home loan applications, that pushed MBA's measurement of total application volume down a slight 0.2 percent compared to the previous week.

MBA also reported that the average contract interest rate for 30-year fixed-rate mortgages decreased to 4.25 percent last week, down from 4.38 percent. Rates for 15-year fixed-rate mortgages also fell, from 3.77 percent to 3.73 percent.