Refinancing and purchase activity rose in the week ending June 11 as 30-year fixed mortgage rates declined to the low 4.70s on Freddie Mac's survey. The Mortgage Bankers Association reported that the Refinance Index jumped 21.1% to ~3462 - its highest level since May 2009.

As a percent of total applications, refinancing share increased to 74.8% from 72.2%, which is the highest refinance share since last December.

Despite the increase, refinancing activity remains very muted relative to the mortgage rate levels as a result of burnout, ongoing tight credit conditions, underwater mortgages, and a weak jobs market.

Activity is not expected to ramp up sharply unless the no-point mortgage rate drops to below 4.75%, which Barclays Capital analysts said will require the 10-year note yield dropping to under 2.80%.

Most of these borrowers that would be able to refinance are the 2009 vintage 4.5s and 5s which were written under tighter underwriting standards.

In addition, after five weeks of declines following expiration of the homebuyers tax credit, the Purchase Index bounced up 7.3% to ~181. 

"While it is clear that purchase application sin May dropped sharply as a result of the tax credit induced increase in applications in April, it is unclear whether we are seeing the beginnings of a rebound now,"In comments on purchases, MBA Vice President of Research and Economics said

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