Mortgage applications increased 0.9% from one week earlier, according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending May 16, 2014.  

The Market Composite Index, a measure of mortgage loan application volume, increased 0.9% on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 0.4% compared with the previous week.  The Refinance Index increased 4% from the previous week.  The seasonally adjusted Purchase Index decreased 3% from one week earlier.

“Renewed concerns about the state of the global economy, particularly in Europe, led to a flight to quality to US Treasury securities, thereby pushing interest rates down in the US,” said Mike Fratantoni, MBA’s chief economist.  “Rates on conforming loans hit 6 month lows and jumbo rates hit 12 month lows.  Refinance volume picked up somewhat as a result, but it still remains more than 65% below last year's pace.  Purchase volume continues to run more than 10% below last year's pace."

The refinance share of mortgage activity increased to 52% of total applications from 50% the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 8% of total applications.

“Although buyers didn’t show up at the same pace, homeowners looking to refinance are finding interest rates at six-month lows.  This second bite at the apple was unexpected and should help refinance activity, including HARP refinances, gain additional momentum while these rates last,” Quicken Loans vice president Bill Banfield said.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.33%, the lowest rate since November 2013, from 4.39%, with points decreasing to 0.20 from  0.22 (including the origination fee) for 80% 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 4.24%, the lowest rate since May 2013, from 4.29%, with points decreasing to 0.1 from 0.16 (including the origination fee) for 80% 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 4.06%, the lowest rate since October 2013, from 4.09%, with points decreasing to -0.39 from -0.17 (including the origination fee) for 80% LTV loans.  The effective rate decreased from last week. 

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.43%, the lowest rate since October 2013, from 3.48%, with points increasing to 0.15 from 0.12 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.

The average contract interest rate for 5/1 ARMs decreased to 3.14% from 3.17%, with points increasing to 0.29 from 0.24 (including the origination fee) for 80% LTV loans.  The effective rate decreased from last week.