Mortgage Apps Increase Again, as Refis Rise 22%

Mortgage application volume for the period ending Jan. 16 reached its highest level since June 2013, led by a 22% increase in refinance applications, according to data from the Mortgage Bankers Association.

The MBA's market composite index was up 14.2% on a seasonally-adjusted basis from one week earlier. During the previous weekly period, loan application volume experienced the largest week-over-week gain in more than six years rising 49.1%.

The latest weekly increase was largely due to mortgage rates falling to their lowest level in 20 months, said Mike Fratantoni, chief economist for the Washington-based trade group.

The average contract interest rate for 30-year fixed mortgages with conforming loan balances below $417,000 plunged nine basis points, to 3.8%. Jumbo loans above $417,000 saw the average 30-year fixed rate decrease two basis points, to 3.86%. Additionally, mortgages backed by the Federal Housing Administration fell five basis points, to 3.66%. Meanwhile, the average contract interest rate for 15-year fixed mortgages dropped six basis points, to 3.1%

Loan applications are now also rising because of President Obama's announcement earlier this month to reduce FHA mortgage insurance premiums by half a percentage point, to 0.85% of the loan balance. Both conventional refinances and government refinances increased week over week by 21% and 29%, respectively.

FHA refinance applications elevated 57% from the previous week. But even with this increase, refinances accounted for only 48% of FHA volume, compared to 73% for Veterans Affairs loans, and 77% for conventional loans.

The refinance share of mortgage activity represented 74% of total applications for the weekly time period. The adjustable-rate mortgage share was 6.4%, the FHA share of applications was 8%, VA loans accounted for 9.4% of all activity, and the USDA volume was 0.6%, the MBA said.