Mortgage applications for home purchases spiked last week for a second consecutive week as home buyers rushed to beat new, more stringent FHA loan standards set to take effect Oct. 4, the Mortgage Bankers Association reported Wednesday.
Overall mortgage applications were down as the MBA's Market Composite Index decreased 0.2% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 0.3%.
The decline was led by a 2.5% drop in the Refinance Index.
The seasonally adjusted Purchase Index increased 9.3% from the previous week and was the highest it has been since the week ending May 7, 2010. The unadjusted Purchase Index was up 9.1% from the previous week but still 34.7% lower than the comparable week last year.
"The increase in purchase activity was led by a 17.2% increase in FHA applications, while conventional purchase applications also increased by 3.6%," said Jay Brinkmann, MBA's chief economist. "This is the second straight weekly increase in purchase applications and the highest Purchase Index level since the expiration of the homebuyer tax credit program. One possible driver of last week's big increase in FHA applications was a desire by borrowers to get applications in before new FHA requirements took effect October 4th, which included somewhat higher credit score and down payment requirements."
The four week moving average for the seasonally adjusted Market Index was down 3.0%; for the Purchase Index, it was up 2.0%, and for the Refinance Index, it was down 4.2%. The refinance share of mortgage activity decreased to 78.9% of total applications from 80.7%. The adjustable-rate mortgage (ARM) share increased slightly to 6.1%.
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.25% from 4.38%, with points decreasing to 1.00 from 1.01 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans, a new record low for the surveey. The rate for 15-year fixed-rate mortgages decreased to 3.73% from 3.77%, also a new record low. The rate for one-year ARMs increased to 7.11% from 7.04%.