Mortgage Rates Fall, Loan Demand Soars 9%

February 10, 2016

Mortgage rates posted a sharp drop last week, which sparked a refinancing rush among home owners, the Mortgage Bankers Association reported Wednesday.

Mortgage application volume, including applications for refinancings and home purchases, surged 9.3 percent week over week on a seasonally adjusted basis.

The gains were almost all attributed to refinancing applications, which posted a 16 percent week-to-week increase. Applications for home purchases barely budged for the week, rising just 0.2 percent. Still, purchase applications are 25 percent higher than a year ago, the MBA reports.

"Treasury yields plummeted again last week amid a worsening global financial maelstrom, and mortgage rates dropped as a result," says Michael Fratantoni, the MBA’s chief economist.

The MBA reports that the 30-year fixed-rate mortgage was at its lowest average since April, averaging 3.91 percent last week.

The lower mortgage rates particularly motivated borrowers with large mortgages this week. The average loan size on mortgage applications reached its second highest level on record at $303,000 and a refinance loan size of $302,000, the MBA reports.

"Jumbo borrowers are also benefiting from fierce competition for these loans,” Fratantoni says. “The 30-year fixed rate for jumbo loans dropped to its lowest level since April 2013 and is now 15 basis points below the rate for conforming loans. Historically, the rate for conforming loans was about 25 basis points lower than for jumbo loans."

Source: “Wealthy Borrowers Behind 9.3% Jump in New Mortgages,” CNBC (Feb. 10, 2016)