Five weeks of declining mortgage rates have spurred another refinancing boom, but demand for purchase mortgages sagged last week after a temporary surge of homebuyers rushing to beat stricter FHA standards.

For the week ending Oct. 8, demand for purchase loans was down 8.5 percent from the week before and 37.1 percent from the same time a year ago, the Mortgage Bankers Association said in releasing the results of its Weekly Mortgage Applications Survey.

A week before, demand for FHA-backed loans had surged 17.2 percent, as homebuyers rushed to get their loan applications in before new credit score and downpayment requirements kicked in on Oct. 4.

Under changes announced in July, borrowers now need a FICO score of at least 580 in order to purchase a home with the minimum 3.5 percent downpayment. Borrowers with scores between 500-579 need downpayments of at least 10 percent, and those with scores below 500 won’t qualify for the program, HUD said in a Sept. 3 letter to lenders.

Increased demand for FHA-backed loans helped push applications for purchase loans up a seasonally adjusted 9.3 percent during the week ending Oct. 1.

Demand for FHA purchase loans is now back down closer to the average seen over the past four months, said Michael Fratantoni, the MBA’s vice president of research and economics, although applications for conventional purchase loans are now at their highest level since the beginning of May, following the expiration of the homebuyer tax credit.

Meanwhile, demand for refinancings was up 21 percent from the previous week, as mortgage rates hit new lows in the MBA survey. Refinance application volumes are now close to the highest level this year, Fratantoni said.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.21 percent from 4.25 percent, with points increasing to 1.02 from 1 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The 30-year contract rate is the lowest recorded in the survey, besting the previous low set the week before.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.62 percent from 3.73 percent, with points decreasing to 1.06 from 1.14 (including the origination fee) for 80 percent LTV loans. The 15-year contract rate is the lowest recorded in the survey.

The average contract interest rate for one-year ARMs decreased to 7.03 percent from 7.11 percent, with points increasing to 0.27 from 0.24 (including the origination fee) for 80 percent LTV loans.

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