Rates Bounce off Floor

Applications fell by nearly ten percent from last week’s record high, the Mortgage Bankers Association of America (MBA) reported. Refinances, which have driven the overall application index up, remain near their highest level ever. The Refinance Index fell to 8135.7 — its third highest level in history — from a record 9387.0 last week. A year ago the refi index stood at just 1450.6.

Refinances made up more than three-quarters of all applications, MBA reported.

MBA said purchase applications rose, with the Purchase Index rising to 383.7 from 347.3 the previous week.

Mortgage applications continued to fueled by low rates, with the average 30-year fixed rate mortgage at 5.91% — not far from the record low 5.61% reached two week’s prior — according to Freddie Mac’s weekly survey. The 30-year is twelve basis points (BPS) higher than last week and 127 BPS better than a year ago.

“Following the onset of the Iraq conflict, financial markets seem to have an upward bias for mortgage rates,” said Freddie’s chief economist Frank Nothaft. “Specifically, the market expects the conflict to end relatively soon, thereby allowing the business sector to shift its focus from the short-term to the long-term and begin activity that would spur economic growth.”

Freddie said the average 15-year fixed rate rose ten BPS from the prior week to 5.21%, and the average 1-year adjustable rate mortgage rose 9 BPS to 3.84%.

Nearly half of the mortgage bankers, mortgage brokers, and other industry experts surveyed by Bankrate.com expect no change in interest rates. “Although the longer-term trend points to higher rates, borrowers will see ample opportunities to lock on the dips,” said Greg McBride, Bankrate.com’s financial analyst.