The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending August 27, 2010.  The Market Composite Index, a measure of mortgage loan application volume, increased 2.7 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 2.3 percent compared with the previous week.

The Refinance Index increased 2.8 percent from the previous week and is at its highest level since May 1, 2009. The seasonally adjusted Purchase Index increased 1.8 percent from one week earlier. The unadjusted Purchase Index decreased 0.4 percent compared with the previous week and was 37.0 percent lower than the same week one year ago.

"Refinancing activity picked up again last week, reaching new 15-month highs, as borrowers took advantage of even lower mortgage rates.  The drop in mortgage rates was in line with Treasury rates as the latest data continue to show weak economic growth and an exceptionally weak housing market," said Michael Fratantoni, MBA's Vice President of Research and Economics.  "The sharp decline in MBA's Purchase Application index in May had provided a clear leading indicator of the drops in new and existing home sales that were reported for June and July.  Despite the slight increase in purchase activity in the past week, the continued low level of purchase applications indicates we are unlikely to see an increase in new home sales reported for August or existing home sales reported for September."

The four week moving average for the seasonally adjusted Market Index is up 5.2 percent.  The four week moving average is down 0.2 percent for the seasonally adjusted Purchase Index, while this average is up 6.3 percent for the Refinance Index.

The refinance share of mortgage activity increased to 82.9 percent of total applications from 82.4 percent the previous week and is the highest refinance share observed since January 2009. The adjustable-rate mortgage (ARM) share of activity increased to 6.1 percent from 5.8 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.43 percent from 4.55 percent, with points increasing to 1.34 from 0.89 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The contract rate is a new low for this survey. The effective rate also decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.88 percent from 3.91 percent, with points decreasing to 1.45 from 1.64 (including the origination fee) for 80 percent LTV loans. The contract rate is a new low for this survey. The effective rate also decreased from last week.

The average contract interest rate for one-year ARMs increased to 6.95 percent from 6.84 percent, with points increasing to 0.23 from 0.22 (including the origination fee) for 80 percent LTV loans.