While last week's large drop in interest rates sparked a surge in refinance activity, purchase mortgage application volume increased for the first time in over a month, according to the Mortgage Bankers Association.
The MBA's Weekly Mortgage Applications Survey for the week ending Aug. 9 found that total activity increased 21.7%. It was led by a 37% rise in the refinance index
The seasonally adjusted purchase index increased 2% from one week earlier, while the unadjusted purchase index increased 1% compared with the previous week and was 12% higher than the same week one year ago.
The refinance share of mortgage activity increased to 61.4% of total applications from 53.9% the previous week.
"The 2019 refinance wave continued, as homeowners last week responded to extraordinarily low mortgage rates," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. "Fears of an escalating trade war, combined with economic and geopolitical concerns, once again pulled U.S. Treasury rates lower. The 30-year fixed mortgage rate decreased eight basis points to 3.93% — the lowest level since November 2016 — and has now dropped more than 80 basis points this year.
"In just the last two weeks, rates have decreased 15 basis points and the refinance index has increased more than 50%, reaching its highest level since July 2016. The government refinance index, driven by a 25% increase in VA refinance applications, is now at its highest level since May 2013."
Adjustable-rate mortgage activity increased to 6% from 4.7% of total applications and the share of Federal Housing Administration-insured loan applications decreased to 9.5% from 11% the week prior.
The share of applications for Veterans Affairs-guaranteed loans decreased to 12.2% from 12.8% and the U.S. Department of Agriculture/Rural Development share decreased to 0.5% from 0.6% the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased 8 basis points to 3.93%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350), the average contract rate decreased 8 basis points to 3.88%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased 5 basis points to 3.81%. For 15-year fixed-rate mortgages, the average decreased 9 basis points to 3.28%. The average contract interest rate for 5/1 ARMs increased 7 basis points to 3.43%.
