NEW YORK - Mortgage applications increased 23.1% from one week earlier (last week's results included an adjustment for New Years Day), according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending January 13. 

The refinance index increased 26.4%, to its highest level since August 8, 2011. The purchase index increased 10.3%.

The four-week moving average for the seasonally adjusted market index is up 5.99%. The four-week moving average is up 1.96% for the seasonally adjusted purchase index, while this average is up 7.00% for the refinance index.

The refinance share of mortgage activity increased to 82.2% of total applications from 80.8% the previous week.  This is the highest refinance share since October 22, 2010. The adjustable-rate mortgage (ARM) share of activity increased to 5.6% from 5.4% of total applications from the previous week.

"Interest rates dropped last week due to continuing anxieties regarding the fragile economic situation in Europe," said Michael Fratantoni, MBA's Vice President of Research and Economics. Fratantoni continued, "With mortgage rates reaching new lows, refinance volume jumped and MBA's refinance index reached its highest level in the last six months. Purchase activity also increased as buyers returned to the market after the holiday season."

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.06% from 4.11%.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.33% from 3.40%.

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