Mortgage application activity jumped nearly 13% in response to a decline in mortgage rates to below 5%.

The Mortgage Bankers Association reported that the average contract interest rate for 30-year fixed rate mortgages dipped to 4.97% from 5.08%.

In response, the Refinance Index increased 17.4% to 2882 and the Purchase Index gained 5.6% to 288 for the week ending Sept. 18. The Refinance Index remains at its highest level since the end of May when mortgages were below 5%.

As a percent of total application activity, refinance share rose to 63.8% from 61.0% in the previous report. ARM share was 6.7% versus 6.0%.

So far in September, the Refinance Index is averaging 29% higher than August's average at 2663, with mortgage rates 13 basis points lower for a 5.06% average.

October prepayment speeds, which will be reported in November, are currently projected to increase 5%, with the largest percentage increases in 5s and 5.5s

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