Applications for refinance loans jumped 41.5 percent last week, after the Federal Reserve announced expanded purchases of mortgage-backed securities that pushed interest rates to lows not seen in six decades, the Mortgage Bankers Association said today.
Applications for purchase mortgages for the week ending March 20 were up a more modest 4.2 percent, the MBA said, with requests for refinance loans accounting for 78.5 percent of all mortgage applications.
The Fed announced on March 18 a $1.15 trillion expansion of its balance sheet, including a $750 billion increase to a previous commitment to buy $500 billion in mortgage-backed securities (MBS) backed by Fannie Mae, Freddie Mac and Ginnie Mae (see story).
The Fed’s announcement brought the average contract interest rate for 30-year fixed-rate mortgages to 4.63 percent last week, down from 4.89 percent the week before, the MBA said. Points, including the origination fee, averaged 1.13, down from 1.23 the week before.
That rate — available to borrowers putting 20 percent down — was the lowest since the MBA began the weekly surveys in 1990.
The average contract interest rate for one-year adjustable-rate mortgage (ARM) loans increased to 6.22 percent from 6.2 percent, with points increasing to 0.15 from 0.14 (including the origination fee) for 80 percent loan-to-value loans.
With rates on fixed-rate and ARM loans moving in opposite directions, applications for ARM loans made up only 1.4 percent of applications, down from 2 percent the week before, the MBA said.
Fixed-rate mortgages haven’t been this affordable since the early 1950s, MBA Chief Economist Jay Brinkmann said this week in boosting the association’s projections for 2009 mortgage originations.
While purchase originations are expected to fall slightly from 2008 levels, the refi boom could push total mortgage originations to $2.78 trillion in 2009, which would be the fourth-highest total on record. That estimate could prove too optimistic if fears of inflation push rates back up, Brinkmann said (see story).
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