Applications to refinance loans, which made up 57 percent of total volume, fell 3 percent from the previous week and are down 47 percent from a year ago, even though interest rates were 70 basis points higher for a 30-year fixed loan in the same week of 2014.
"Rates have been below 4 percent in 12 of the last 13 weeks. However, so many borrowers have refinanced in recent years at very low rates, they just are not responding to rates at this level," said Fratantoni. "The refinance index has actually decreased in 7 of the last 13 weeks despite rates fluctuating within a narrow range."
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.86 percent from 3.89 percent, with points decreasing to 0.27 from 0.36 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, according to the MBA survey.
Despite the increase in applications, mortgage application volume is still considerably lower than historical norms, and especially low today, given pent-up housing demand. Some argue that credit availability is still too tight, which is keeping potential buyers on the sidelines.
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Another survey from the Mortgage Bankers released Tuesday showed credit availability increasing slightly in March, but still dramatically lower than it had been even before the housing boom. To explain the easing, the report pointed to Freddie Mac's introduction of its 3 percent down payment program (Fannie Mae's was implemented in December), additional loosening of parameters on jumbo loan programs, an increase in offerings of cash-out refinance loans, and continued expansion of the Federal Housing Administration's (FHA) streamline refinance and Veteran's Administration (VA) Interest Rate Reduction Refinance Loan programs.