It took a few weeks for the lowest interest rates since 2013 to spur a new refinancing wave, but it’s finally in full gear as the Mortgage Bankers Association reported today that all mortgage applications recorded a big 49 percent surge last week.
That’s the highest weekly gain since November 2008, the height of the financial crisis, according to the MBA.
The bankers’ refinance component of its index increased 66 percent from the previous week to the highest level since July 2013. The index component that measures applications for home purchases shot up 24 percent from one week earlier to the highest level since September 2013.
“The US economy and job market continued to show signs of strength, but weakness abroad and tumbling oil prices have led to further declines in longer-term interest rates,” said Mike Fratantoni, MBA’s Chief Economist.
Mortgage rates have reached their lowest level since May of 2013, falling under 4 percent and causing refinance application volume to soar, more than doubling on an unadjusted basis, and up 66 percent after adjusting for the fact that the previous week included the New Year’s holiday.
Conventional refinance volume increased to a greater extent than government refinance volume. Applications for larger refinance loans increased more than 4 times relative to the previous week.
The average conventional refinance application increased to $298,700 from $233,500 the prior week.
There has been a wave of positive news for borrowers over recent weeks. In addition to the drop in rates and news of improvement in the job market, there is “evidence that credit availability has increased somewhat,” said Fratantoni.
And there’s the Federal Housing Administration’s (FHA) announcement of a decrease in their mortgage insurance premiums.
The refinance share of mortgage activity increased to 71 percent of total applications from 65 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.9 percent of total applications. The FHA share of total applications decreased to 7.5 percent this week from 9.3 percent last week.
The average contract interest rate for 30-year fixed-rate mortgages, with conforming loan balances ($417,000 or less,) decreased to 3.89 percent, the lowest level since May 2013, from 4.01 percent, for 80 percent loan-to-value ratio (LTV) loans, the MBA reported.
The average contract interest rate for 30-year fixed-rate mortgages, with jumbo loan balances (greater than $417,000), decreased to 3.88 percent, the lowest level since May 2013, from 3.99 percent, for 80 percent LTV loans.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.71 percent, the lowest level since May 2013, from 3.81 percent, for 80 percent LTV loans. The effective rate decreased from last week.