Lower mortgage rates fueled a nearly 10 percent surge in applications for home loans, including a big jump in refinancing as many in the market realize rates may not stay below 4 percent for too long.
Applications for U.S. mortgages rose last week as interest rates dropped to their lowest level since February, according to the Mortgage Bankers Association.
The average contract interest rate for 30-year fixed-rate mortgages, with conforming loan balances ($417,000 or less), decreased to 3.90 percent, its lowest level since February 2015, last week, the MBA said. Federal Reserve watchers expect policy makers to start raising the central bank’s key interest rate by this summer, at the earliest. The anticipation is prompting many in the housing market to jump on the current sub-4 percent interest rates.
The MBA said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, rose 9.5 percent in the week ended March 20.
The group’s seasonally adjusted index of refinancing applications jumped the highest, 12 percent. Its measure of loan requests for home purchases, an indicator of home sales, rose 5 percent to the highest level since January 2015.
The refinance share of total mortgage activity increased to 61 percent of applications from 59 percent the week before.
The average contract interest rate for 30-year fixed-rate mortgages, with jumbo loan balances (greater than $417,000) decreased to 3.89 percent, its lowest level since January 2015, from 3.94 percent, for 80 percent loan-to-value loans.
The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.