Mortgage applications for refinancing shot up 23 percent last week as interest rates slipped to near 4 percent or below, according to the national index provided by the Mortgage Bankers Association (MBA).
Overall, mortgage applications for both purchases and refinancing jumped 11.6 percent last week. But it’s refinancing demand that seems to be making a rebound. The refinance component of the MBA’s index increased 23 percent from the previous week to the highest level since November 2013.
Moreover, borrowers who have seen their home values rise over the past two to three years are refinancing at higher loan levels, indicating an increase in “cash-outs.”
“Mortgage rates have fallen close to 30 basis points over the last four weeks,” said Mike Fratantoni, MBA’s Chief Economist. “Refinance application volume reached the highest level since November 2013 as a result, and the average loan balance for refinance applications increased to $306,400, the highest level in the survey’s history.”
The refinance share of mortgage activity increased to 65 percent of total applications, the highest level since December 2013, from 59 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 9.4 percent of total applications, the highest level since June 2008.
Flight to U.S. Treasuries Spurs Lower Rates
“Continuing concerns about weak economic growth in Europe and a few US economic indicators that came in below expectations caused a flight to quality into US Treasuries last week, leading to sharp drops in interest rates,” Fratantoni said.
The average contract interest rate for 30-year fixed-rate mortgages, with conforming loan balances ($417,000 or less) decreased to 4.10 percent, the lowest level since May 2013, from 4.20 percent, for 80 percent loan-to-value ratio (LTV) loans.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to 4.03 percent, the lowest level since May 2013, from 4.14 percent, for 80 percent LTV loans.
The average contract interest rate for 30-year fixed-rate mortgages backed by the Federal Housing Administration decreased to 3.81 percent, the lowest level since June 2013, from 3.90 percent, for 80 percent LTV loans.
Last week, Freddie Mac reported that the rate on the average 30-year fixed-rate mortgage fell just below 4 percent, the lowest level so far this year.