Mortgage applications soared 55% last week from the week prior, and demand for refinances rose to an almost 11-year high, according to the Mortgage Bankers Association.
The deluge came after rates fell to record lows because of uncertainty in the markets sparked by a spread of the coronavirus that causes COVID-19, said Joel Kan, an MBA economist.
“Market uncertainty around the coronavirus led to a considerable drop in U.S. Treasury rates last week, causing the 30-year fixed rate to fall,” Kan said. “Homeowners rushed in.”
The group’s index measuring refinancing applications surged 79% to the highest level since April 2009, he said. Compared to a year ago, it increased by a whopping 479%, Kan said.
The refinance share of mortgage activity was increased to 76.5% of total applications, rising from 66.2% the previous week, the MBA said.
The group’s index measuring purchase applications was 12% higher than a year ago, he said.
“Prospective buyers continue to be encouraged by improving housing inventory levels in some markets and very low rates,” Kan said.
The spike in demand prompted the trade group to boost its forecast for 2020 refinancing originations to $1.2 trillion, a 37% increase from 2019 and the strongest refinance volume since 2012, Kan said.
“As lenders handle the wave in applications and manage capacity, mortgage rates will likely stabilize but remain low for now,” he said. “This in turn will support borrowers looking to refinance or purchase a home this spring.”
According to the MBA, the seasonally adjusted Purchase Index increased 6% last week, while the unadjusted purchase index increased 7% and remains 12% higher than a year ago.
Here is a more detailed breakdown of last week’s mortgage application data:
- The adjustable-rate mortgage share of activity increased to 5.9% of total applications.
- The Federal Housing Administration share of mortgage apps fell to 6.9% from 9.3%.
- The Department of Veterans Affairs share of applications increased to 13.1% from 10.5% the previous week.
- The Department of Agriculture share of total applications inched backward to 0.3% from 0.4%
- Mortgage interest rates for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to its lowest level since December 2012, at 3.47%.
- The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400) decreased to its lowest level since 2011, to 3.58%.
- The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.75% from 3.57%.
- The average contract interest rate for 15-year fixed-rate mortgages decreased to 2.9%, from 3.03%.
- The average contract interest rate for 5/1 ARMs decreased to 3.02%, from 3.12%.
[Correction: This article is updated to reflect the correct time period for the mortgage application data.]