Applications for both the purchase of a home and refinancing existing loans soared 25 percent last week, compared to the previous week — mostly because of anxiety over new mortgage-closing regulations taking effect Oct. 3.
The Mortgage Bankers Association said that both applications to refinance and to purchase a home were equally robust. Refinance applications jumped 24 percent, seasonally adjusted, and purchase applications shot up by 27 percent.
Purchase applications, which normally don’t surge like this because of interest rate changes, are now 49 percent higher than one year ago. They are now at their highest level in five years.
The biggest motivator was not the threat of looming higher interest rates, particularly if the Federal Reserve makes its anticipated move of raising short-term rates before the year’s out. It was mostly about new rules that took effect this week that are intended to further protect borrowers. The rules — referred to by insiders at “TILA-RESPA” — force lenders to disclose all the terms of a loan clearly at least three days prior to closing. The start date for the new rules was October 3rd.
“The number of applications for purchase and refinance mortgages soared last week due both to renewed rate volatility and as many applications were filed prior to the TILA-RESPA regulatory change,” said Lynn Fisher, MBA’s Vice President of Research and Economics. “The average loan size of applications in the weekly survey increased by 6.9 percent, driven by a 12.1 percent increase in the average size of refinances.”
The refinance share of mortgage activity actually decreased to 57.4 percent of total applications, from 58.0 percent the previous week, a key sign that refinancing to take advantage of low rates was not the fuel behind the week’s big surge in applications. The adjustable-rate mortgage (ARM) share of activity increased to 7.6 percent of total applications.
The FHA share of total applications decreased to 12.7 percent from 13.8 percent the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.99 percent, the lowest level since May 2015, from 4.08 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 3.89 percent, the lowest level since April 2015, from 3.96 percent, for 80 percent LTV loans.