U.S. mortgage applications jumped to their highest level since October 2016, led by a surge in refinancing activity, as some home borrowing costs declined to their lowest levels in more than a year, the Mortgage Bankers Association said on Wednesday.
The Washington-based group’s seasonally adjusted index on requests for loans to buy a home and to refinance one increased 18.6% to 503.6 in the week ended March 29, Reuters reported. This was the strongest reading since 512.9 in the week of Oct. 14, 2016.
The Refinance Index increased 39 percent from the previous week, and was at its highest level since January 2016.
"There was a tremendous surge in overall applications activity, as mortgage rates fell for the fourth week in a row - with rates for some loan types reaching their lowest levels since January 2018. Refinance borrowers with larger loan balances continue to benefit, as we saw another sizeable increase in the average refinance loan size to $438,900 - a new survey record," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting.
"We had expected factors such as the ongoing strong job market and favorable demographics to help lift purchase activity this year, and the further decline in rates is providing another tailwind. Purchase applications were almost 10 percent higher than a year ago."
Added Kan, "The average loan size for purchase loans declined slightly, as applications for smaller purchase loan sizes exceeded that of higher loan sizes - a positive sign that first-time buyers were increasingly active in the market."
The refinance share of mortgage activity increased to 47.4 percent of total applications from 40.4 percent the previous week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.36 percent from 4.45 percent.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.78 percent from 3.87 percent.
Refinancing still remains well below historic highs after falling to an 18-year low last year, when mortgage rates rose above 5 percent, Reuters reported. Refinancing made up about 28 percent of mortgage originations in 2018, down from a peak of 75 percent in 2012, according to seasonally adjusted data from the MBA.
Last month, the U.S. Federal Reserve signaled it would not raise interest rates this year. Other standard interest rates, including the 15-year fixed mortgage rate, were also lower this week.
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