Mortgage application volume surged 29.7% on sharply lower rates last week, as borrowers who took out loans during the past 1-3 years rushed to refinance, according to the Mortgage Bankers Association (MBA).
During the week ended September 12, the average contract interest rate for a 30-year fixed-rate mortgage with conforming loan balance was 6.39%, down from 6.49% the previous week, according to MBA’s Weekly Mortgage Applications Survey.
Applications for refinances jumped 58% compared with the previous week and were up 70% compared with the same week one year ago.
Applications for purchases increased 3% compared with the previous week and were up 20% compared with the same week one year ago.
“Indicative of the weakening job market, and in anticipation of a rate cut from the Federal Reserve, mortgage rates last week dropped to their lowest level since last October, with the 30-year fixed rate declining to 6.39 percent,” says Mike Fratantoni, senior vice president and chief economist for the MBA, in a statement. “Homeowners responded swiftly, with refinance application volume jumping almost 60 percent compared to the prior week.”
“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,” Fratantoni says. “Almost 60 percent of applications were for refinances, but there was also a pickup in purchase applications.”
“Even as 30-year fixed rates reached their lowest level in almost a year, more borrowers, and particularly more refinance borrowers, opted for adjustable-rate loans, with the ARM share reaching its highest level since 2008,” he adds. “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.”
The refinance share of mortgage activity increased to 59.8% of total applications, up from 48.8% the previous week.
The adjustable-rate mortgage (ARM) share of activity increased to 12.9% of total applications.
Photo: Jungwoo Hong