Higher rates pressed on refinancing activity in the week ending March 23. According to the Mortgage Bankers Association (MBA), the Refinance Index declined 4.6% to ~3438, its lowest level since early December.

Meanwhile. refinance applications as a percent of total applications fell to 71.9% from 73.4% and is at its lowest level since July.

Refinancing activity has dropped for six straight weeks since reaching a year-to-date high of 4538 in mid-February when mortgage rates declined to a record low.

Activity has been adversely impacted by higher trending mortgage rates since mid-February. The MBA reported the contract rate for 30-year fixed rate conforming loans averaged 4.23%, the highest rate since last November, from 4.19%. The Federal Housing Administration (FHA) rates rose three basis points to 3.96%.

Also influencing refinance activity was a large 12% drop in government refinance activity compared to just 3.4% for conventional applications.

The decline in FHA loans is not necessarily a surprise and is related to the recent announcement reducing upfront and annual premiums on streamline refinancings for loans issued before June 1, 2009. Since it is not effective until June 11, these potential borrowers are waiting to apply in June.

Possibly preventing a further decline may have been a pick up applications for FHA loans closed after June 1, 2009. These borrowers will face an increase in the annual insurance premium and in the upfront premium effective for cases assigned April 9.

Meanwhile, the Purchase Index increased 3.3% to 191, while total application activity was down 2.7%.

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