Mortgage application volume increased on a weekly basis as the share of applicants looking to refinance rose to its highest level since February.
The Mortgage Bankers Association's composite index was up 5.6% for the week ending Oct. 10.
The refinance index surged 11% week-over-week, while the purchase index fell 1%, the Washington-based trade group said.
Refinance activity accounted for 59% of total loan applications, which is up three percentage points from the week before, the MBA said. Furthermore, the adjustable-rate mortgage share of activity represented 8% of total applications.
The refinance surge was stimulated by declining interest rates as most loan products fell to their lowest levels in roughly 16 months.
For example, the average contract interest rate for a 30-year fixed mortgage dropped one basis point, to 4.2%. This rate has not been this low since June 2013, the MBA reported. A 30-year fixed-rate jumbo loan mortgage plunged seven basis points, to 4.14%, a mark not seen since May 2013. Additionally, 30-year fixed mortgages backed by the Federal Housing Administration declined one basis point, to 3.9%. This loan product has not been below 4% since last summer, the trade group said.
Meanwhile, the average contract interest rate for 15-year fixed mortgages also was down seven basis points, to 3.41%.
"Growing concerns about weak economic growth in Europe caused a flight to quality into U.S. assets last week, leading to sharp drops in interest rates," Mike Fratantoni, chief economist for the Mortgage Bankers Association, said in a Wednesday news release.
