Mortgage application activity increased in the week ending Jan. 15, according to the Mortgage Bankers Association (MBA).

The rise resulted from the further improvement in mortgage rates. The organization said the Refinance Index rose 10.7% to ~2665 with refinance share at 71.7%, up slightly from 71.5% in the previous week. 

Since year-end, the index has recovered by nearly 35% from the holiday slowing and some response to declining mortgage rates.

The MBA reported the average contract interest rate for 30-year fixed rate mortgages dropped 13 basis points to 5.0%. Rates are down 18 basis points since the beginning of the year.

Purchase activity was also higher as homebuyers continued to take advantage of the homebuyers tax credit. The Purchase Index gained 4.4% to ~224.

With the increased refinancing activity, speeds are expected to show more moderate slowing in February (reported in March) compared with January. 

At this time, speeds on 30-year FNMAs and GNMAs are projected to slow 6% to 8% on average with the largest slowing in 5s and 5.5s, while limited slowing is seen on higher coupons due to buyouts related to loan modifications.

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