As interest rates on 30-year mortgages held at or just below 4 percent, refinance applications surged last week as borrowers anticipated that the Federal Reserve would begin raising its benchmark short-term rate.
As it turned out, the Fed held the line, announcing on Sept. 17 that the federal funds rate would remain at near zero for now. But not before mortgage applications overall increased 13.9 percent last week, compared to a week earlier, according to data from the Mortgage Bankers Association for the week ending September 18, 2015.
The refinancing portion of mortgage applications soared 18 percent, while applications for the purchase of a home increased a solid 9 percent from one week earlier to its highest level since June 2015.
“We saw significant rate volatility last week surrounding the (Fed) meeting, and rate declines toward the end of the week likely drove applications from both prospective home buyers and borrowers looking to refinance,” said Mike Fratantoni, MBA’s Chief Economist.
The 30-year fixed rate remained unchanged over last week, even though there was substantial intra-week fluctuation, he added. But there was rate decreases in other loan products, such as the 15-year fixed, 5/1 ARM, and 30-year jumbo.
The refinance share of mortgage activity increased to 58.4 percent of total applications, from 56.2 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.9 percent of total applications.
The Federal Housing Administration (FHA) share of total applications decreased to 12.9 percent, from 14.2 percent the week prior. The VA share of total applications decreased to 10.0 percent from 10.7 percent the week prior. The USDA share of total applications decreased to 0.7 percent from 0.8 percent the week prior.
The average contract interest rate for 30-year fixed-rate mortgages, with conforming loan balances ($417,000 or less),remained unchanged at 4.09 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 3.99 percent, its lowest level since May 2015, from 4.04 percent, for 80 percent LTV loans.