The Mortgage Bankers Association's (MBA) Refinance Index reversed out exactly the prior week's percentage decline, increasing 15.3% to 3268.7 for the week ending Dec. 2.

"Coming out of the Thanksgiving holiday, applications increased significantly as mortgage rates dropped to their lowest levels in about two months," said Michael Fratantoni, MBA's vice president of research and economics. "In particular, refinance applications increased sharply, with some lenders seeing refinance volume double."

Fratantoni said that despite this surge, aggregate refinance activity is still below levels reported two weeks ago.

However, there was a notable bit of Home Affordable Refinance Program (HARP) activity showing up.

"Some lenders indicated they are beginning to see an increase in HARP loans, but that increase is still a small portion of the move this week," Fratantoni said.  This should pick up in the weeks ahead and more likely in 2012 as lenders become more active in soliciting borrowers.

For the month of November, the Refinance Index averaged 7% lower from October to 3380 despite mortgage rates declining to an average of 3.99% from 4.07%.  These results point to another benign prepayment report in December, following an uneventful one in November.  

Meanwhile, the Purchase Index also bumped up 8.3% to 208, its highest level since early August as borrowers took advantage of the record affordability.

The average contract interest rate for 30-year fixed rate mortgages slipped three basis points for both conforming and Jumbo loans to 4.18% and 4.52%, respectively, while Federal Housing Administration rates eased to 3.98% from 4.0% and is at its lowest level since January of this year.  As a percent of total applications, refinancing share increased to 76% from 73.9%; ARM share ticked lower to 5.7% from 5.8%.

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