by Calculated Risk on 8/17/2011 12:42:00 PM

This morning the MBA reported that there was a sharp increase in mortgage refinance activity.

“Refinance application volume increased substantially for the week, although there was substantial variation across the market. In September MBA’s Weekly Applications Survey will transition to an expanded sample that covers 75% of the retail market rather than the current sample that covers roughly 50% of the retail market. That expanded sample showed a significantly larger increase in refinance applications than the current sample, with some lenders reporting increases in refinance applications in excess of 50 percent for the week. The big differences in refinance volumes were likely driven by the decisions of some lenders not to drop rates last week, largely due to the need to manage their pipelines.” [said Mike Fratantoni, MBA’s Vice President of Research and Economics

First, the increase in the sample size is good news. There have been times when the mortgage purchase activity index wasn't very useful because so many mortgage lenders were going out of business.

Also it is interesting that some lenders haven't lowered their rates (probably many of the biggest mortgage lenders).

Here is a graph of the MBA refinance index compared to the ten year treasury yield.

Click on graph for larger image in graph gallery.

Although refinance activity has picked up, it is still well below the level of the huge refinance boom of 2002/2003, and below the smaller refinance peaks in 2008, 2009 and last year.

It takes lower and lower rates to get people to refi (at least lower than recent purchase rates). However if interest rates fall much further there will probably be another large increase in refinance activity.