More trouble in the Ukraine led to more applications for U.S. mortgage refinances last week; it is all about interest rates.
As investors poured into the bond market and interest rates fell, mortgage rates followed suit. Total mortgage application volume increased 1.4 percent on-week last week, according to data from the Mortgage Bankers Association (MBA). Refinance applications were behind the surge, rising 3 percent on-week, on a seasonally adjusted basis. They are still off 31 percent from a year ago, despite the fact that rates are lower today than they were a year ago.
"Conventional refinance applications increased last week as mortgage rates dropped to their lowest level in over a month. However, the refinance index remains within the narrow range we have been in over the past year, as most borrowers have little incentive to refinance at this level of rates," said Michael Fratantoni, chief economist for the MBA.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.29 percent from 4.35 percent, for 80 percent loan-to-value ratio (LTV) loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to 4.18 percent from 4.24 percent.
Mortgage applications to buy a home continue to weaken, down 0.4 percent from a week ago. These applications, which are vital to the recovery in single-family housing, are down 11 percent on-year. Behind the drop, a near 6 percent decline in applications for government mortgages, which include loans from the Department of Veterans Affairs and loans insured by the Federal Housing Administration (FHA). The MBA could offer no explanation for the decline in government loan applications.