The continued decline in mortgage rates to two-year lows is prompting existing homeowners to rush to take advantage of potential savings.
Mortgage refinance applications rose 20% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Demand was 175% higher than the same week a year ago.
The average contractual interest rate on 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) fell to 6.13% from 6.15%, with the percentage point increase to 0.57 from 0.56 (including origination fees) for loans with a 20% down payment. The rate was 128 basis points higher in the same week a year ago, or 7.41%.
“The 30-year fixed rate fell for the eighth straight week to 6.13%, while the FHA rate fell to 5.99%, above the psychologically important 6% level,” Joel Kahn, vice president and deputy chief economist at the Mortgage Loan Association, said in a statement. “As a result of the rate decline, weekly gains in both conventional and government refinance applications increased sharply.”
Refinancing’s share of applications rose to 55.7%. While the jump from a year ago is significant and the share now makes up the majority of total mortgage demand, the level of refinancing activity remains modest compared to previous waves of refinancing, according to Kahn.
Part of this is due to a seasonal slowdown in home buying. Mortgage applications to buy a home rose just 1% during the week, and were 2% higher than the same week a year ago. Buyers continue to face high home prices and a limited supply of homes for sale.
“Average loan sizes were higher for both purchase and refinance applications, pushing the average overall loan size to its highest level in the survey’s history at $413,100,” Kahn added.
Mortgage rates didn't see much movement early this week, and more pressing economic data is likely to be released later in the week and early in October.
