A drop in interest rates resulted in a weekly spike in mortgage applications, particularly for refinancing, which saw the highest pace of activity in over a month, the Mortgage Bankers Association said in its latest report.
The MBA's Market Composite Index recorded a seasonally adjusted increase in application volume of 2% compared to the previous week for the period up to May 7th. Adjusted, the increase was also 2%, while the total application volume for mortgages decreased by 3.3% a year ago.
The main reason for the increase was the refinancing index, which rose by 3% compared to the week before and rose to a point that has not been seen since March. The index was down 12% year over year. According to Joel Kan, the MBA's vice president of economic and industrial forecasting, the sizeable weekly jump was fueled by borrowers looking for cheaper terms.
“The fall in interest rates helped the refinancing index hit its eight-week high, driven by a 4% increase in conventional refinancing. In addition, refinancing loan balances rose for the fourth straight week, an indication that higher balance borrowers were quick to take advantage of lower interest rates, ”he said in a press release.
The refinancing share of the week's mortgage volume rose from 61% in the previous week to 61.3%.
Home buyers also reacted to the fall in interest rates and increased the seasonally adjusted purchasing index by 1% compared to the previous week. The unadjusted number also increased by 1% compared to the previous week and by 13% compared to the same period last year, which was close to it
The time when the real estate market emerged from the pandemic-induced halt in activity.
"Most markets continue to see robust demand this spring, but activity will continue to be constrained by insufficient inventory levels and home construction challenges related to ongoing shortages and price increases for building materials," Kan said.
The average new mortgage size remained relatively stable. The average mortgage size rose slightly to $ 337,700 from $ 337,000 the week before. The average mortgage amount for purchases rose to $ 409,800 from $ 408,100 the previous week, while the average refinance loan size increased from $ 291,500 to $ 292,300.
Variable rate mortgages accounted for 3.8% of the total, up from 3.9% the previous week.
Federal Housing Office insured mortgages decreased to 9.9% of total volume, compared to 10.1% the week before, while Veterans Affairs guaranteed loans decreased from 11.9% to 11.7%. However, the proportion of U.S. Department of Agriculture / Rural Housing Service mortgages rose to 0.5% from 0.4% the previous week.
The average contract rate on 30-year fixed rate mortgages with compliant loan balances of $ 548,250 or less fell seven basis points from 3.18% in the previous week to 3.11%, while the average contract rate on jumbo loans with larger balances also fell to 3 , 27% from 3.31%.
The 30-year fixed rate on FHA loans fell from 3.13% in the previous week to 3.07%.
The average 15-year fixed rate mortgage rate fell to 2.49% from 2.54% the week before, and the average 5/1 ARM contract rate was 2.57% compared to 2.76% week over week .