Following a drop in mortgage rates to new record lows, home loan activity surged during the week ending July 13.
Overall applications rose nearly 17 percent from the previous week, according to a report from the Mortgage Bankers Association. A spike in refinancing requests caused the total gain, as borrowers continued to capitalize on affordable mortgage rates and government programs.
"Refinance application volume increased last week to near peak levels for the year as mortgage rates dropped to a new low, driven down by growing concerns about the health of the U.S. economy," said MBA vice president of research and economics Michael Fratantoni.
Specifically, the refinance share of activity increased 22 percent from a week earlier, and accounted for 80.1 percent of total home loan applications. This is the highest the share has been in more than a month.
Meanwhile, applications for the Home Affordable Refinance Program accounted for 24 percent of refinance requests, Fratantoni added. This share has remained relatively unchanged during the past few weeks.
Borrower rates higher than averages
Mortgage records indicate that of the home loan rates acquired by borrowers, the average interest rate for a 30-year fixed-rate mortgage with a conforming loan limit was 3.74 percent. In addition, the rate for a 30-year FRM jumbo loan averaged 3.98 percent. Although these rates continue to provide affordable options for consumers, they were well above the average interest rates reported by Freddie Mac during the week ending July 12.
Borrowers taking on loans with higher than average rates could be an indicator the financial standings of Americans remain on shaky ground, and lenders could be issuing increased interest to compensate for the potential risk.
During this period the overall rate for a 30-year FRM averaged just 3.56 percent, down from 3.62 percent a week earlier, according to the mortgage giant. A string of uncertain economic reports is believed to have caused the decline.
"Following a lackluster employment report for June, long-term U.S. Treasury bond yields eased somewhat this week allowing fixed mortgage rates to reach yet another record low," said Freddie Mac vice president and chief economist Frank Nothaft.
Meanwhile, the economy added an estimated 80,000 new jobs in June. While this may seem like a significant gain, it was not enough to lower the unemployment rate, which has remained at 8.2 percent for two consecutive months.