Applications for refinancing surged during the week ended July 13 sending mortgage application volumes to "near peak levels for the year" according to the Mortgage Bankers Association (MBA).  This drove the MBA's Market Composite Index, a measure of overall mortgage application volume, up 16.9 percent on a seasonally adjusted basis and 46 percent on an unadjusted basis from the previous week.

The Refinance index increased 22 percent from the previous week and refinancing represented 80.1 percent of all mortgage applications compared to 77 percent during the week ended July 6.  The seasonally adjusted Purchase Index decreased 0.1 percent from a week earlier but the unadjusted Index was up 25 percent although it was 3 percent lower than the same week in 2011.

Applications for the Home Affordable Refinance Program (HARP 2.0), the government's program for low or no equity mortgages represented 24 percent of applications for refinancing.  This indicates further growth in the program that had claimed a new market share high of a 20 percent in its May activity report released last week.

Mike Fratantoni, MBA's Vice President of Research and Economics said the near peak levels in refinancing applications resulted from new low interest rates which were "driven down by growing concerns about the health of the U.S. economy."

Purchase Index vs 30 Yr Fixed

Refinance Index vs 30 Yr Fixed

Rates for all fixed rate mortgages (FRM) fell again during the week as did their effective rates, establishing new lows across the board.  The average contract interest rate for 30-year FRM with a conforming balance of $417,500 or less was 3.74 percent with 0.45 point compared to 3.79 percent with 0.36 point the previous week.  The jumbo 30-year FRM (loan balance over $417,500) carried an average rate of 3.98 percent with 0.32 point, down from 4.05 percent with 0.34 point.

Fifteen-year FRM rates averaged 3.12 percent with 0.48 point compared to 3.15 percent with 0.43 point and the rate for 30-year FRM backed by FHA decreased to 3.55 percent from 3.63 percent with points increasing to 0.44 from 0.36.

The 5/1 adjustable rate mortgage (ARM) was the only outlier.  The product's rate remained unchanged at an historic low of 2.71 percent although points increased from 0.36 to 0.51 and the effective rate increased.  ARMs accounted for 4.1 percent of all mortgage applications.

Interest rates quoted are for loans with an 80 percent loan-to-value ratio and points include the application fee.