Mortgage Refinance Applications Increase as Mortgage Rates Tick Lower, But Home Purchases Remain Elusive

By Kyle Chezum Updated on 1/19/2011

1/19/11

Mortgage application rates leapt ahead again this week, spurred by a minor refinance boom.  The Mortgage bankers Association reported a 7.7% increase in refinance applications during the week ended January 14^th.  This is tied to an unexpected decrease in mortgage rates since the start of the year.

Home purchase application levels remain weak and saw a minor decrease during the week.  Purchases accounted for no more than 27% of all mortgage applications generated during the week, a decrease from about 28% the week prior.  Refinance applications made up the other 73%, an increase.

Michael Fratantoni, an economist and executive with the MBA, reported that the continued lack of purchase applications signals continued unrest in the housing market.  “Mixed data on the job market continue to cloud the outlook for the economy ,” he said.  “Home sales are unlikely to pick up any time soon.”

Mortgage rates saw a steady increase during the final months of 2010, leading to speculation that the housing market might recover and carry the overall economy with it.  Less than a week into 2011, though, a different picture emerged.  Fratantoni believes that continued unemployment and other uncertainty has driven mortgage rates back down.

Average rates on 30 year fixed loans dipped last week to 4.77% from 4.78% during the week prior.  15 year fixed rates increased by a similarly minute amount.  The total volume of mortgage applications increased 5%, a substantial gain.