WASHINGTON–The decline in mortgage rates led to a 58% increase in applications to refinance a home loan last week, and were 70% higher than the same week one year ago, according to the Mortgage Bankers Association’s seasonally adjusted index.
Applications for a mortgage to purchase a home rose 3% for the week and were 20% higher than the same week one year ago.
The refinance share of mortgage activity increased to 59.8% of total applications from 48.8% the previous week, the MBA said.
The developments come as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $806,500 or less, decreased to 6.39% from 6.49%, with points falling to 0.54 from 0.56, including the origination fee, for loans with a 20% down payment, the MBA data indicate.
Jumping First
“Homeowners with larger loans jumped first, as the average loan size on refinances reached its highest level in the 35-year history of our survey,” Mike Fratantoni, senior vice president and chief economist at the MBA, said in a statement.
The MBA said refi applications were particularly strong for adjustable-rate mortgages, rising to 12.9% of total applications, its highest level since 2008.
“Notably, ARMs typically have initial fixed terms of five, seven, or ten years, so those loans do not pose the risk of early payment shock that pre-2008 ARMs did. Borrowers who do opt for an ARM are seeing rates about 75 basis points lower than for 30-year fixed rate loans,” Fratantoni added in his statement.
