The average contract interest rate for 30-year fixed rate mortgages dropped 12 basis points to 5.0%, according to the Mortgage Bankers Association (MBA) survey.
As a result, the Refinance Index jumped 17.8% to ~2178 for the week ending Feb. 18, while the Purchase Index gained 5.1% to ~184.
As a percent of total application activity, refinancing share picked up to 65.7% from a nine month low of 64%. Meanwhile, ARM share slipped to 5.6% from 6% after five weeks of increases.
"Ongoing turmoil in the Middle East brought interest rates lower last week," said Michael Fratantoni, MBA vice president of research and economics. "Borrowers took advantage of these lower rates, bringing application activity back near levels from two weeks ago, following sharp declines last week."
Through the first three weeks of February, the Refinance Index is down 8% on average from January's average which will keep prepayment speeds muted.
At this time, speeds in March (reported in April) are expected to be flat to slightly higher, primarily as the day count jumps to 23, following a projected decline of 15% to 20% in February, while April should be 5% to 10% slower given that day count is dropping to 20.
