Driven by a drop in interest rates, mortgage applications surged last week on a higher volume of homeowners applying to refinance their mortgages to reach the highest level of the year, according to the Mortgage Bankers Association.
The drop in rates sent the 30-year fixed rate loan to an average of 4.37%, while the 15-year mortgage averaged a flat 3.52%. Rates have already come down substantially more ever since S&P downgraded the U.S. credit rating late Friday evening.
Refinancing activity soared 30% on the week to the highest level of the year, according to the bankers’ survey which accounts for about half of all U.S. mortgages finalized during any week. However, applications for home purchase money applications dropped nearly 1%, demonstrating a sluggish home selling market continues during what is usually the busy summer home buying season as consumers remain leery about the U.S. economy.
The slowdown in home sales was reflected in the National Association of Realtors figures last month, and is expected to remain low in the upcoming report for July.
“Over the past month, refinance application volume has increased by 63%,” said Mike Fratantoni, MBA’s vice president of research and economics. “Refinance applications for jumbo loans increased by almost 75% relative to last week. Despite these low mortgage rates, applications for home purchases have remained little changed through the summer.”
The share of applications filed to refinance mortgages rose to 75.6% of all applications from 70.1% a week earlier. Adjustable rate loans made up just 6.1% of applications, a drop from 6.6% a week earlier.
The four-week moving averages for the overall market index grew 9.7% as refinances pushed the index higher to 13.7%. The seasonally adjusted purchase index was unchanged.