Refi surge fuels rise in mortgage apps on MBA survey as today's mortgage rates retreat from lows

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Borrowers seeking to refinance their existing mortgages rushed to apply for loans last week, pushing refinance volume on the Mortgage Bankers Association weekly survey to its highest level in over a month. And just in time, too, for mortgage rates this week have begun to pull back from their record low levels.

Refinance loan volume rose 11.2% on the MBA's Weekly Mortgage Applications Survey for the week ending Sept. 23, contributing to a seasonally adjusted 9.6% rise in overall loan volume. New purchase loan application volume also rose last week, by a seasonally adjusted 2.6%.

MBA Vice President of Research and Economics Mike Fratantoni attributed the surge to the Federal Reserve's announcement of "Operation Twist" - its move to drive down long-term interest rates by replacing short-term Treasury bonds with longer-term ones in its holdings over the next several months. “Mortgage rates declined last week, at least partially in response to the Fed’s announcement that they would shift their portfolio towards longer-term Treasury securities, and that they would resume buying mortgage-backed securities,” he said. “With lower rates, refinance application volume increased to its highest level since August 19, 2011. Purchase application volume also increased. However, the increase was in conventional purchase applications, which were up by 4.9 percent. Purchase applications for government loans fell by 0.6 percent over the week, likely influenced by the pending decline in FHA loan limits.”

With one exception - 15-year fixed-rate mortgages - mortgage rates fell across the board last week on the latest MBA survey. This week, however, the interest rate picture is changing. Benchmark mortgage interest rates on today's weekly national survey rose this week for the first time in nine weeks, despite the Fed's move. The benchmark rate for a 30-year fixed-rate mortgage rose 1 basis point to 4.3% with an average 0.37 discount and origination fee points. The benchmark rate for a 15-year fixed mortgage rose 5 points to 3.47%, and the benchmark 5-year ARM rate shot up 8 points to 3.13%.

Bankrate attributes the hike to reduced fears that the euro might collapse in the wake of a Greek default. Progress has been reported towards a financial package that would bolster the balance sheets of debt-strapped eurozone nations and provide a further infusion of money to Greece. For its part, Greece has moved ahead with further austerity measures that have triggered widespread domestic unrest but made it possible for Chancellor Andrea Merkel of Germany, which has played the leading role in the effort to shore up the euro, to push further assistance through an increasingly resistant Bundestag.

One lender quoted in today's Bankrate report also noted that lenders and investors overreacted to last week's Fed announcement, and that the bond markets have corrected themselves since.

Even with today's reversal of the mortgage rate slide on Bankrate - which the largest share of lenders surveyed for the weekly Rate Trend Index, 40%, expects will continue for a second week - mortgage rates are expected to remain extremely low for the rest of the year. Of the rest of the lenders, 33% said rates would hold steady and 27% said they would resume their decline.

Today's mortgage rates steady or higher on overnight surveys

Movements for both the day and the week on today's national overnight surveys confirm the end of the down streak.

This morning's average mortgage rates on the overnight survey, with changes from Tuesday and one week ago, are: 30-year fixed, 4.1% (+5 points, unchanged); 15-year fixed, 3.36% (+3 points, +3 points); 5-year ARM, 3.02% (+3 points, +9 points); 30-year fixed refinance loan, 4.2% (+5 points, unchanged).

Yesterday's average afternoon mortgage rates on the National Mortgage Marketplace, with changes from Tuesday and last week, are: 30-year fixed, 3.89% (+3 points, -4 points); 15-year fixed, 3.18% (+1 point, +6 points); 5-year ARM, 2.73% (-1 point, +7 points). Today's real-time rates as of 7 a.m., with changes from Tuesday afternoon and yesterday afternoon, are: 30-year fixed, 3.85% (-4 points, -4 points); 15-year fixed, 3.16% (-3 points, -2 points); 5-year ARM, 2.72% (unchanged, -1 point).

One basis point equals one hundredth of a percentage point. Rates reported in this article assume good credit (FICO score of 650 or higher) and a 20% down payment. Morning rates from are for loans for the most creditworthy borrowers (FICO score of 720 or higher). One discount point represents one percent of the total value of a mortgage, paid as interest up front.

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