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Refis Strengthen Again as Rates Plummet

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It was the third week in a row that inquiries for refinances were higher as mortgage rates continued to descend to depths not seen before. All signs point to even lower mortgage rates in next week’s report. But at least one category that did not participate in the rally was purchase financing.

A 4 percent increase was recorded from the prior week for the U.S. Mortgage Market Index from Mortech Inc. and Mortgage Daily, leaving the index for the week ended May 18 at 233. The index was unchanged from the week ended May 20, 3011.

The best-performing category in today’s report was refinance, which climbed 10 percent from last week and was 42 percent higher than the same week last year. Refinance business has risen each of the past three weeks.

Total refinance share rose to 70 percent from 67 percent and was just half a year ago. This week’s refinance share reflected a 58 percent rate-term share and a 13 percent cashout share.

The next-biggest gain was with jumbo mortgages, which had 6 percent more pricing inquiries pulled this week than last week. The improvement came despite a widening jumbo-conforming spread, which increased to 63 basis points from 57 BPS a week earlier. Jumbo loans were priced at a 55-basis-point premium during this week last year.

Jumbo pricing inquiries accounted for 22 percent of all activity in the latest report, up from 21 percent seven days prior.

Conventional business was up 5 percent from last week and the same as this week last year.

There was no change from a week earlier for adjustable-rate mortgage inquiries, though ARM activity tumbled 56 percent from a year prior. ARM share was 4.390 percent, lower than last week’s 4.562 percent and less than half of the 9.97 percent share at this point in 2011.

Three percent fewer borrowers inquired this week about a mortgage insured by the Federal Housing Administration, and FHA activity sank 29 percent from a year ago. FHA share, meanwhile, fell to 9.753 percent from 10.417 percent a week earlier and 13.88 percent a year earlier.

The worst-performing category was purchase financing, with pricing inquiries falling 8 percent for the week and sinking 41 percent from this week last year.

The average 30-year fixed-rate mortgage fell to 3.877 percent from 3.949 percent and was 4.767 percent a year previous. The 30 year has never been this low since the Mortgage Market Index was launched in 2009.

Fifteen-year mortgages were priced 72 BPS below 30-year loans, not as much of a discount as the 79-basis-point spread in the previous report. A year ago the spread was 80 BPS.

Mortgage rates are likely to be 6 BPS better in the next Mortgage Market Index report. Data from the Department of the Treasury indicates that the yield on the 10-year Treasury note averaged 1.77 percent during the period covered by this week’s index, while the 10-year yield closed at 1.71 percent Friday.

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