Applications for purchase mortgages during the week ending May 21 were down a seasonally adjusted 3.3 percent from one week earlier, to the lowest levels since April 1997, the Mortgage Bankers Association said today in releasing the results of its Weekly Mortgage Applications Survey.

Applications for refinancings were up 17 percent, however, to the highest level since October, as borrowers sought to take advantage of falling interest rates.

Applications for purchase mortgages during the week ending May 21 were down a seasonally adjusted 3.3 percent from one week earlier, to the lowest levels since April 1997, the Mortgage Bankers Association said today in releasing the results of its Weekly Mortgage Applications Survey.

Applications for refinancings were up 17 percent, however, to the highest level since October, as borrowers sought to take advantage of falling interest rates.

Mortgage rates have fallen as investors’ fears about the European debt crisis make investments in bonds and mortgage-backed securities look more attractive.

"Refinance application volume jumped last week as continuing financial market turmoil related to the budget crises in Europe extended the opportunity for homeowners to lock in at historically low mortgage rates," said Michael Fratantoni, MBA’s vice president of research and economics, in a statement.

Requests for refinancings accounted for 72.2 percent of total applications, up from 68.1 percent the previous week, and the highest share observed in the survey since December.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.8 percent from 4.83 percent, with points remaining constant at 1.08 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans — the lowest rates since November.

The average contract interest rate for 15-year fixed-rate mortgages increased to 4.25 percent from 4.19 percent, with points decreasing to 1 from 1.36 (including the origination fee) for 80 percent LTV loans. However, due to the decrease in points, the effective rate decreased from last week.

The average contract interest rate for one-year ARMs increased to 6.83 percent from 6.81 percent, with points increasing to 0.38 from 0.37 (including the origination fee) for 80 percent LTV loans.

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