Mortgage Applications Increase By 7.1% Amid Rate Drop, Refinance Activity Spikes

In a notable shift, mortgage applications have increased by 7.1% compared to the previous week, according to the latest data from the Mortgage Bankers Association.

The Market Composite Index, a key measure of mortgage loan application volume, has seen a parallel increase of 7.1% on a seasonally adjusted basis from the previous week. On an unadjusted basis, the Index spiked by 8% compared to the prior week.

Of particular interest is the Refinance Index, which soared by 12% from the previous week and marked a 5% increase compared to the same week last year. 

"Purchase application volume increased for the week but remains about 11 percent below last year’s level. By contrast, refinance volume picked up by 12 percent, with a larger, 24 percent increase in the government refinance index. While these percentage increases are large, the level of refinance activity remains quite low, and we expect that most of this activity reflects borrowers who took out a loan at or near the peak of rates in the past two years," MBA Chief Economist Mike Fratantoni said.

The refinance share of mortgage activity increased to 31.6% of total applications from 30.2% the previous week. However, the adjustable-rate mortgage (ARM) share of activity remained steady at 7.7% of total applications.

Notable changes were also observed in the shares of total applications by loan type. The FHA share decreased to 12% from 12.7%, while the VA share increased to 12.2% from 11.4%. The USDA share remained unchanged at 0.5%.

Key interest rates also saw adjustments. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased to 6.84% from 7.02%, while the rate for jumbo loan balances dropped to 7.04% from 7.21%. Rates for FHA-backed loans decreased to 6.77% from 6.86%.