The Market Composite Index, a measure of mortgage loan application volume, increased 5.6 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 6 percent compared with the previous week.  The Refinance Index increased 11 percent from the previous week.  The seasonally adjusted Purchase Index decreased 1 percent from one week earlier.  The unadjusted Purchase Index decreased 0.3 percent compared with the previous week and was 4 percent lower than the same week one year ago.

“Growing concerns about weak economic growth in Europe caused a flight to quality into US assets last week, leading to sharp drops in interest rates.  Mortgage rates for most loan products fell to their lowest level since June 2013,” said Mike Fratantoni, MBA’s Chief Economist.  “Refinance application volume reached the highest level since June 2014 as a result, with conventional refinance volume at its highest since February 2014.”

The refinance share of mortgage activity increased to 59 percent of total applications, the highest level since February 2014, from 56 percent the previous week.  The adjustable-rate mortgage (ARM) share of activity increased to 8.0 percent of total applications.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.20 percent, the lowest since June 2013,  from 4.30 percent, with points decreasing to 0.17 from 0.19 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.  The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to 4.14 percent, the lowest since May 2013, from 4.21 percent, with points decreasing to 0.10 from 0.29 (including the origination fee) for 80 percent LTV loans.  The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.90 percent, the lowest since June 2013, from 4.00 percent, with points decreasing to 0.08 from 0.15 (including the origination fee) for 80 percent LTV loans.  The effective rate decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.41 percent, the lowest since July 2014, from 3.48 percent, with points decreasing to 0.28 from 0.32 (including the origination fee) for 80 percent LTV loans.  The effective rate decreased from last week.

The average contract interest rate for 5/1 ARMs decreased to 3.05 percent, the lowest since June 2013, from 3.20 percent, with points increasing to 0.38 from 0.37 (including the origination fee) for 80 percent LTV loans.  The effective rate decreased from last week.