A home loan sign on a Wells Fargo branch in Brooklyn, New York.
An unexpected drop in mortgage rates had homeowners calling the lenders last week and wanting to save money on the monthly payments.
The demand for refinancing rose sharply, pushing the total application volume of 5.2% last week compared to last week, according to the Mortgage Bankers Association's seasonally adjusted index. Volume was 69% higher than the same week a year ago, when interest rates were significantly higher.
The average contract rate for 30-year fixed rate mortgages with matching loan balance ($ 484,350 or less) fell to 3.90% from 3.99%, with points falling to 0.37 from 0.38 (including origination fee) for loans with a 20% down payment. This rate was 1
"US government bond yields moved significantly lower last week, as data showing weakness in the service sector was a sign that slowing economic growth is not limited to industry," said Joel Kan, assistant vice president for economic and industrial forecasting at MBA. "This led to a flight in investor safety, which resulted in mortgage rates falling across the board."
In response, interest-rate refinancing applications jumped 10% from last week and were 163% higher than the same week a year ago. The refinancing share of mortgage activity increased to 60.4% of total applications from 58.0% last week.
Mortgage applications to buy a home, which is less interest-sensitive week to week, decreased 1% from a week earlier, but was 10% higher than the same week a year ago.
"Despite low prices, they may cloud the economic outlook and ongoing market uncertainty keep some potential home buyers away from the market this fall," Kan said.
The consumer's sense of housing declined in September, according to another study by Fannie Mae. Several Americans said they were concerned about losing their jobs, and that they in turn pulled down housing sentiment.