Low interest rates last week drove demand for home loans to the highest level in almost seven years.

Applications rose 5% from the prior week to the highest level since May 2013, according to a seasonally adjusted index from the Mortgage Bankers Association.

The 10-year Treasury yield, a benchmark for mortgage bond investors, dropped nearly 20 basis points last week as economic concerns over the Chinese coronavirus continued to spread, said Joel Kan, MBA’s associate vice president of economic and industry forecasting.

“This drove mortgage rates lower, with the 30-year fixed-rate decreasing for the fifth time in six weeks to 3.71%, its lowest level since October 2016,” Kan said. “Refinance activity jumped as a result, with an increase in the number of applications and a spike in the average loan amount, as homeowners with jumbo loans reacted more resoundingly to lower rates.”

The Refinance Index spiked by 15% to the highest level since June 2013, MBA said. Compared with a year earlier, it was a whopping 183% higher.

The Purchase Index fell by 10% as buyers were challenged by a shortage of homes on the market, Kan said. Compared with a year earlier, it was 7.7% higher, he said.

“Prospective buyers weren’t as responsive to the decline in mortgage rates – likely because of suppressed supply levels,” Kan said. “Purchase applications took a step back, but still remained 7.7% higher than a year ago.”

The refinance share of mortgage activity increased to 64.5% of all mortgage applications compared to last week’s 60.4%, the MBA report said.

Here is a more detailed breakdown of this week’s mortgage application data:

• The adjustable-rate mortgage share of activity increased to 5.9% of total applications.
• The Federal Housing Administration’s share of mortgage apps moved backward to 9.6% from last week’s 10.7%.
• The Department of Veterans Affairs share of applications fell to 10.2% from last week’s 11.7%.
• The Department of Agriculture’s share of total applications retreated from last week’s 0.5% to 0.4%.
• Mortgage interest rates for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.71% from the previous week’s 3.81%.
• The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400) declined to 3.7% from 3.78% one week before.
• The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.8% from 3.82% the prior week.
• The average contract interest rate for 15-year fixed-rate mortgages fell to 3.19 from last week’s 3.24%.
• The average contract interest rate for 5/1 ARMs increased from last week’s 3.15% to 3.23%