Despite mortgage rates moving back to a record low of 4.78% early in the week, according to Freddie Mac's survey, mortgage application activity was not very responsive.

The Mortgage Bankers Association's (MBA) reported the Refinance Index rose 1.2% to 5169 for the week ending May 1, while the Purchase Index gained 5.0% to 264.3.

As a percent of total application activity, refinancing share fell to 74.4% from 75.3% — and is at its lowest since mid-March. ARM share was unchanged at 2.1%.

For the month of April, the Refinance Index averaged 5940.7, up 13.5%% from March, while the 30-year fixed mortgage rate averaged 4.81%, down 19 basis points from March's average.

The previous month saw a 51% increase on average on refinancing activity with a 13 basis point decline in the mortgage rate to a 5% average.

The rather moderate increase relative to the mortgage rate decline is attributed to mortgage banker capacity constraints. This could lead to some downward revisions to the May prepayment outlook.

At this time, FNMA speeds are projected to jump around 40% in May (reported in June) from April.

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