Mortgage Applications Rise as Rates Fall; Refinancing Activity Surges

The mortgage market is alive and well.

Data shows home loan applications rose sharply over the past week, fueled largely by a surge in mortgage refinancing as interest rates sunk back to their lowest levels in more than a year, the Mortgage Bankers Association reported Wednesday morning.

The MBAA said that its seasonally adjusted index of mortgage application activity for the week ending December 1 increased 8.1 percent to 647.6 from the previous week’s 599.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged just 5.98 percent, down 0.15 percentage point from the previous week, the lowest since the week ending October 7, 2005, when it stood at the same level. Rates were also below earlier levels of 6.32 percent.

That decline in home loan rates was enough to spur a decline in refinance activity from people looking to lock in on low fixed-rate loans. The MBA’s seasonally adjusted index of home loan refinancing applications jumped an impressive 13.7 percent to 1,989.7.

Expect these mortgage refinancing trends to continue if rates remain this low. The group’s seasonally adjusted purchase index rose 4.9 percent to 426.6, its highest since May. However, the week’s purchase index reading was substantially below its year-ago level of 495.1.

In the previous week, mortgage applications declined, in large part due to a shorter business week and the Thanksgiving holiday. The group’s index is considered to be a timely gauge of U.S. home sales, which have lagged considerably this year after five straight years of record-breaking totals.