Refinance volumes fell from July to August in response to a sharp rise in mortgage rates in June, the Federal Housing Finance Agency (FHFA) said in its monthly report. The drop comes after an increase in refinancing in the first half of the year as mortgage rates fell. “Refinance volumes are strongly influenced by mortgage rates with the effect most visible on a one- to two- month lag,” the FHFA said in its monthly report. Separately, the agency said that the average interest rate on conventional 30-year, fixed-rate, mortgage loans of $417,000 or less decreased 1 basis point to 5.30 percent in August. The average interest rate on 15-year, fixed-rate loans of $417,000 or less increased 3 basis points to 4.92 percent. Rates on 30-year mortgages declined to as low as 4.81 in April, from 5.29 in December, before rising slightly to 4.86 in May and shooting up to 5.42 in June. Refinancings rose from less than 100,000 a month in December to more than 500,000 in March and again in June, before declining in response to higher rates. The FHFA monthly report said that Fannie Mae and Freddie Mac refinanced more than 3.2 million mortgage loans in the first eight months of the year.

In August, nearly 360,000 mortgages were refinanced. “Successful refinancing is a key element of the ongoing efforts to stabilize the housing market,” said Edward J. DeMarco, acting director of the agency. He added that 260, 000 homeowners who are current on their mortgage payments have been assisted through the Making Home Affordable Refinance Program (HARP) and other streamlined refinance programs administered by Fannie Mae and Freddie Mac. “The number is certain to grow as expanded refinance opportunities go into effect this fall,” he said. In July, FHFA announced the expansion of HARP to allow borrowers with loan-to-value ratios (LTVs) up to 125 percent to participate. This will allow more borrowers to refinance and to do so without added mortgage insurance requirements, a previous barrier to refinancing, the agency said.