Home refinancing applications increase while purchase index declines

Low mortgage rates boosted home refinancing applications to a 13-month high in early July, while the purchase index decreased 2 percent after the expiration of a federal tax incentive in April. 

The refinance gauge increased 9.2 percent from the previous week, hitting its highest level since May 15, 2009, according to data released by the Mortgage Bankers Association (MBA) on Wednesday. 

The seasonally adjusted purchase index decreased 2 percent from one week earlier, the eighth time in the past nine weeks. 

“For the month of June, purchase applications declined almost 15 percent relative to the prior month, and were down more than 30 percent compared to April, the last month in which buyers were eligible for the tax credit,” said Michael Fratantoni, MBA’s vice president of research and economics in a release today. 

A federal tax incentive of up to $8,000 expired April 30. Homebuyers eligible for the write-off were granted a three-month extension to Sept. 30 to complete closings on their purchases. 

Loan application volume increased 6.7 percent on a seasonally adjusted basis from a week prior, according to the Market Composite Index, a measure of mortgage loan application volume. 

The four-week moving average for the seasonally adjusted market index is up 6.4 percent.  

The refinance share of mortgage activity increased to 78.7 percent of total applications from 76.8 percent the previous week, the highest refinance share observed in the survey since April 2009. 

The average contract interest rate for 30-year fixed-rate mortgages increased to 4.68 percent from 4.67 percent. The average contract interest rate for 15-year fixed-rate mortgages increased to 4.11 percent from 4.06 percent.