The Mortgage Bankers Association reported Wednesday that demand for home loans surged last week, rising 13 percent from the prior week after holding at an unseasonably low level throughout the spring. The increase was largely due to an increase of 19 percent in refinance applications, as the average rate for a 30-year fixed loan rose from a record-low 3.87 percent to 3.88 percent. But the refinance portion of the MBA's mortgage application index wasn't the only gain in the week, as demand for home purchase loans grew to its highest level in more than six months.
Michael Frantonti, the MBA's Vice President of Research and Economics, noted in a statement that the total level of mortgage demand reached its highest level since the Spring of 2009. He also said that participation in the government's HARP program, designed to help underwater borrowers with loans backed by Fannie Mae and Freddie Mac, has held steady at right under 30 percent of all refinancings since the program was expanded in January. Frantoni also suggested that refi volume may pick up even more in the coming weeks thanks to a new FHA program designed to help underwater borrowers.
The percentage of all mortgage applications that were refinance requests rose on the high level of demand from 78 percent two weeks ago to 79 percent. Mortgage brokers confirmed the data as each of four brokers contacted for this story reported a significant jump in application volume. Mortgage application activity is typically viewed as a reliable indicator of home sales in the coming months, but analysts note that today's market is unique in that between 20 and 40 percent of all home sales are to all-cash buyers, limiting the accuracy of loan applications as an indicator of future sales.