Despite mortgage rates setting new record lows, refinancing activity declined in the week ending Sept. 24 by 1.6% to ~4287 — its fourth dip in as many weeks, according to the Mortgage Bankers Association.

This has happened as the average contract interest rate for 30-year fixed rate mortgages dropped to 4.38% from 4.44%. Meanwhile, the Purchase Index rose 2.4% to ~183.

As a percent of total application activity, refinancing share was 80.7%, down from 81.1%. ARM share was slightly higher to 6.0% from 5.9%.

Factors contributing to the decline in refinancing activity are likely borrower expectations that mortgage rates will decline further on a combination of expanding capacity at mortgage bankers and implementation of QE2 by the Federal Reserve

Factors that offset these, however, are the weak economy and jobs situation along with continued tight credit standards. 

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