Mortgage applications drop slightly last week, refinancing hits six-month high

The volume of mortgage applications dropped slightly last week as purchases fell despite historically low home loan rates. 

The weekly index decreased 1 percent as purchases saw a 8.4 percent drop while refinancing increased slightly by 0.8 percent, hitting its highest level since Aug. 8, according to the Mortgage Bankers Association's (MBA) weekly mortgage applications survey for the week ended Feb. 10.

The four-week moving average, a better gauge than the weekly figures, is down by 0.45 percent overall and down 3.87 percent for purchases and up 0.21 percent for refinancing. 

The refinance share of mortgage activity increased to 81.1 percent of total applications from 80.5 percent the previous week, the highest refinance share since Jan. 20.

The average loan size last month was $226,000 up slightly from $225,000 in December and up from $207,000 in January 2011.

The city with the highest average loan size — the nation's capitol, Washington, D.C. with a loans averaging $375,000 compared to an $143,000 average in Indiana, the lowest in the United States. 

Across the country, the average loan size was $217,000 for home purchase applications and $228,000 for refinances in January, according to the survey. 

For mortgage rates — the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 4.08 percent from 4.05 percent, while the jumbo loan rates (greater than $417,500) increased to 4.30 percent from 4.29 percent.

For loans backed by the FHA, the 30-year fixed-rate dropped to 3.87 percent from 3.89 percent. The rate for 15-year fixed-rate mortgages remained unchanged at 3.33 percent.