Refinancing activity increased to 81 percent of all applications from 79 percent the previous week and the Refinancing Index rose one percent.  The seasonally adjusted Purchase Index however fell 9 percent; unadjusted it was down slightly more than 9 percent and was 2 percent lower than during the same week in 2011. 

"Refinance volume increased again last week, but the composition of activity changed markedly.   Despite rates remaining near all-time lows, conventional refinance application volume declined, and the HARP share of refinance activity dropped to 20 percent," said Michael Fratantoni, MBA's Vice President of Research and Economics.  "On the other hand, FHA refinance volume exploded to an all-time high, more than doubling over the week.  New, lower FHA premiums on streamlined refinance loans came fully into effect, and borrowers seized the opportunity to lower their mortgage rates without increasing their FHA premiums.  Purchase activity fell off last week, but this is likely only a recalibration following the Memorial Day holiday, as the level of activity remains within the narrow band seen for the past 3 years."

Purchase Index vs 30 Yr Fixed

Refinance Index vs 30 Yr Fixed

Mortgage rates were mixed. The average contract interest rate for 30-year FRM with conforming loan balances ($417,500 or less) decreased to 3.87 percent, matching the lowest rate in the history of the survey, from 3.88 percent, with points increasing to 0.49 from 0.43.  Jumbo 30-year FRM (balances greater than $417,500) decreased to 4.06 percent, the lowest rate in the history of the survey, from 4.12 percent, with points decreasing to 0.38 from 0.41.  The effective rates of both conforming and jumbo loans decreased.

Even though the interest rate for FHA-backed 30-year FRM increased one basis point to 3.72, points decreased to 0.47 from 0.59 and the effective rate decreased from the previous week.  Rates also increased for 15-year fixed-rate mortgages, from 3.23 percent with 0.48 point to 3.25 percent with 0.45 point. The effective rate also increased.

The 5/1 adjustable rate mortgage (ARM) rate decreased to 2.75 percent, the lowest rate in the history of the survey, from 2.78 percent, with points dropping to 0.33 from 0.49.  The effective rate decreased. The ARM share of application activity decreased to 4 percent of total applications.

All interest rates are for 80 percent loan-to-value ratio loans and points include the origination fee.

MBA reports that during the month of May investors filed 6 percent of applications for home purchase mortgages, unchanged from April.  Investor activity in several regions did increase, including East South Central and South Atlantic which were up by 0.5 percent. 

Data is derived from MBA's Weekly Mortgage Applications Survey which covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990.  Respondents include mortgage bankers, commercial banks and thrifts.  Base period and value for all indexes is March 16, 1990=100.