A surge in refinance activity resulting from a drop in mortgage rates helped push mortgage application volume up 23% during the week ended Jan. 4, according to the Mortgage Bankers Association’s (MBA) Weekly Applications Survey.
Applications for refinances increased 35% compared with previous week, which included the New Year’s Day holiday, while applications for purchases increased 17%.
Previously, mortgage applications fell 9.8% during the two-week period ended December 28. It is typical for volume to fall dramatically during the last two weeks of the year and then pick up in the first week of January.
On an unadjusted basis, total volume increased 68%. Applications for purchases were up 59% on an unadjusted basis and were 4% higher compared with the first week of January 2018.
“Mortgage rates fell across the board last week and applications rebounded sharply, after what was a slower than usual holiday period,” says Joel Kan, associate vice president of economic and industry forecasting for the MBA, in a statement. “The 30-year fixed-rate mortgage declined 10 basis points to 4.74 percent, the lowest since April 2018, and other loan types saw rate decreases of between nine and 20 basis points.
“This drop in rates spurred a flurry of refinance activity – particularly for borrowers with larger loans – and pushed the average loan size on refinance applications to the highest in the survey at $339,800,” Kan adds. “The surge in refinance activity also brought the refinance index to its highest level since last July.”
The refinance share of mortgage activity increased to 45.8% up from 42.7% the previous week to reach its highest level since February 2018.
The adjustable-rate mortgage (ARM) share of activity increased to 8.4% of total applications.
The average loan size for refinance applications reached a survey high at $339,800.
The average rate for a 30-year fixed-rate mortgage in December was 4.74%, down from an average of 4.84% in November.
The average rate for a 5/1 ARM was 4.05%, down from 4.16%.