|Driven by historic levels of refinancing activity, Americans applied for mortgages at a pace never seen before.
Loan applications rose more than four percent from last week's record level, according to the weekly survey of mortgage bankers, commercial banks and thrifts by the Mortgage Bankers Association of America (MBA). The Market Composite Index now stands at an all-time high of 1673.4, MBA reported, and the refinance index -- at 9387.0 -- also reached its highest level ever.
"When homeowners perceive that interest rates have bottomed out, they often rush out to refinance," MBA Senior Economist Phil Colling said. "That's reflected in last week's record high refinance index."
More than 80% of applications were for refinances, MBA said.
MBA said purchase applications barely edged up from the prior week.
After reaching a record low last week, Freddie Mac said the average 30-year fixed rate rose 18 basis points (BPS) this week to wind up at 5.79%. A year ago, the 30-year was at 7.14%.
Freddie surveys 125 lenders thrifts, commercial banks and mortgage lending companies each week.
"Lack of uncertainty around the Iraq conflict caused bond market yields to reverse their downward spiral of recent weeks and mortgage rates followed in tandem," said Frank Nothaft, Freddie's chief economist.
The average 15-year also rose 18 BPS to 5.11%, Freddie said, and the average one-year adjustable rate mortgage (ARM) was up seven BPS to 3.75%. MBA reported that ARM applications made up nearly 13% of all applications.
The majority of mortgage bankers, mortgage brokers and other industry experts surveyed by Bankrate.com expect for rates to rise.
"Rates have rebounded sharply on the expectation that the beginning of the war is imminent, and the hope that the end of the war is equally imminent," said Bankrate.com's financial analyst Greg McBride. "Mixed economic data, fears of terror strikes and anemic corporate earnings could keep rates volatile, so borrowers should lock on any dips."
Freddie's Nothaft expects the recent rise in rates to be only temporary because "there are other uncertainties about the length of the conflict and its impact on the economy that will influence mortgage rates in the weeks to come."