Mortgage application activity eased 0.8% in the week ending June 15 from the prior week due to a 9% drop in purchase activity.

Meanwhile the Refinance Index rose 1% to ~5388, its highest level since April 2009, the Mortgage Bankers Association (MBA) reported. As a percent of total applications, refinancing share increased to 81% from 79%.

"Refinance volume increased again last week, but the composition of activity changed markedly. Despite rates remaining near all-time lows, conventional refinance application volume declined, and the HARP share of refinance activity dropped to 20 percent," said Michael Fratantoni, MBA vice president of research and economics. "On the other hand, FHA refinance volume exploded to an all-time high, more than doubling over the week. New, lower FHA premiums on streamlined refinance loans came fully into effect, and borrowers seized the opportunity to lower their mortgage rates without increasing their FHA premiums."

The MBA also reported the average contract interest rate for 30-year fixed rate conforming loans slipped back one basis point to 3.87%, returning to its record low. Federal Housing Administration rates, meanwhile, rose one basis point to 3.72%.

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