Mortgage application activity was mixed in the week ending Oct. 29 with refinancing activity declining, while purchases rose.

The Mortgage Bankers Association (MBA) reported this morning that the Refinance Index declined 6.4% to ~4330. As a percent of total application activity, refinance share declined to 81.3% from 82.3%.

The adverse response was related to an increase in mortgage rates as the average rate for 30-year fixed mortgages increased three basis points to 4.28%, while points rose to 1.07 from 1.00.

Since peaking at 5060 the week ending Oct. 8, refinancing activity has dropped 14%. For the month of October, refinancing activity averaged 4.4% higher than September.

This is a very modest response to the 12-basis-point decline in mortgage rates to a record low average of 4.23%. Capacity constraints at mortgage lenders remain a factor that keeps a lid on refinancing activity.

Meanwhile, the Purchase Index gained 1.4% to 179 as borrowers responded to record affordability.

In its recent forecast, the MBA projected that refinancing origination will plunge to $370 billion in 2011 from an estimated $921 billion in 2010. Meanwhile, refinancing share is expected to drop significantly to 37% from a predicted 66%. 

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