Mortgage application activity surged during the week ending Sept. 12 thanks to an upswing in refinancing, according to data from the Mortgage Bankers Association (MBA).
The Market Composite Index, the MBA’s measure of mortgage loan application volume, spiked by 29.7% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the index soared by 43% compared with the previous week.
The seasonally adjusted Purchase Index increased 3% from one week earlier while the unadjusted index increased 12% compared with the previous week – the latter was also 20% higher than the same week one year ago. The adjustable-rate mortgage (ARM) share of activity increased to 12.9% of total applications.
The Refinance Index ascended by 58% from the previous week and was 70% higher than the same week one year ago. The refinance share of mortgage activity rose to 59.8% of total applications from 48.8% in the previous week.
Among the federal programs, the FHA share of total applications dropped to 16.3% from 18.5% the week prior while the VA share of total applications inched up to 15.8% from 15.3% the week before and the USDA share of total applications dipped to 0.5% from 0.6 percent the week prior.
Mike Fratantoni, MBA’s senior vice president and chief economist, observed, “Indicative of the weakening job market, and in anticipation of a rate cut from the Federal Reserve, mortgage rates last week dropped to their lowest level since last October, with the 30-year fixed rate declining to 6.39%. Homeowners responded swiftly, with refinance application volume jumping almost 60% compared to the prior week. Homeowners with larger loans jumped first, as the average loan size on refinances reached its highest level in the 35-year history of our survey. Almost 60% of applications were for refinances, but there was also a pickup in purchase applications.”
Fratantoni added, “Even as 30-year fixed rates reached their lowest level in almost a year, more borrowers, and particularly more refinance borrowers, opted for adjustable-rate loans, with the ARM share reaching its highest level since 2008. Notably, ARMs typically have initial fixed terms of five, seven, or ten years, so those loans do not pose the risk of early payment shock that pre-2008 ARMs did. Borrowers who do opt for an ARM are seeing rates about 75 basis points lower than for 30-year fixed rate loans.”
why would anyone refinance at 6.39%????