Driven by record low mortgage rates, applications for new mortgages soared to their highest level since 2009 as consumers applied for refinancing and new home mortgages in growing droves, according to the Mortgage Bankers Association.
Refinance applications jumped by a sizzling 19% from the previous week, and purchase applications also climbed 12.8% from a week earlier. The jump in applications came amid growing economic uncertainty over the European debt crisis, which has unsettled financial markets across the world.
The market composite index, which includes both purchases and refinancing, jumped 18% for the week as the average loan size rose to $243,733, up from $238,135 in April.
Record low mortgage rates are driving most of the increase in home mortgages. The 30-year fixed rate conventional mortgage averaged 3.88% for consumers, a single basis point rise from the prior week. The increase came as the Freddie Mac average reached another record low, the eighth such rate in eight straight weeks.
“The increase was accentuated due to the comparison to the week including Memorial Day, but the level of refinance and total market activity is the highest since the spring of 2009,” said MBA chief economist Michael Fratantoni. “Purchase application volume was its highest level in over six months.”
The jump in mortgage activity for home purchases poses a promising trend for the summer selling season, typically the busiest time of the year for the U.S. housing market.
The average fully executed contract rate for a 30-year fixed rate FHA loan also rose a single basis point for the week to 3.71%.
The average rate on the15-year fixed mortgage rose to 3.23%, three basis points higher. The small jump in rates may seem insignificant to most mortgage purchasers, but could signal a sign of things to come. Mortgage rates are likely to rise, at least slightly, if an agreement can be worked out over the European debt crisis.
The average contract rate for 5/1 adjustable-rate mortgages remained unchanged at 2.78%.