This morning the Mortgage Bankers Association (MBA) reported a 19.6% surge in the Refinance Index to 5888 in the week ending Sept. 28, its highest level since April 2009.
The contract interest rate for 30-year fixed rate conforming loans dropped 10 basis points to 3.53%, while Federal Housing Administration loan rates dipped seven basis points to 3.82%.
“Refinance application volume jumped to the highest level in more than three years last week as each of the five mortgage rates in MBA's survey dropped to new record lows in the survey,” said Michael Fratantoni, MBA’s vice president of research and economics.
For the month of September, refinance activity was up 7.5% from August as mortgage rates averaged 10 basis points lower to 3.50%.
Prepayments in October are currently estimated to increase around 5% after a projected decline in September as the number of collection days increases to 22 from 19. With the pickup in activity, upward revisions are possible.
As a percent of total applications, refinancing share rose to 83% from 81% in the prior week. This appears to be the highest level since October 2010. The surge is primarily from credit-eligible borrowers underlying the cuspy coupons.
Home Affordable Refinance Program (HARP) activity, however, has remained relatively steady Fratantoni said. The report noted the HARP share of refinance applications decreased to 23% from 26% in the prior week which was up from ~22% earlier in the month.
Meanwhile, the Purchase Index increased 3.9% to 194.2, while overall mortgage application rose 16.6%.