Mortgage applications increased 12% from the previous week due to a surprising uptick in demand for “refis” as borrowers try to secure a lower rate, according to the Mortgage Bankers Association (MBA) survey for the week ending Jan. 28.
The seasonally adjusted Refinance Index rose 18.4% in the same period. Meanwhile, the Purchase Index increased 4%.
Compared to the same week one year ago, mortgage apps overall dropped 37%, with a sharp decline in refinance (-50.4%) compared to purchase (-6.7%).
According to Joel Kan, MBA’s associate vice president of economic and industry forecasting, mortgage rates continued to climb, with the 30-year fixed rate rising for the sixth consecutive week to its highest level since March 2020.
The trade group estimates that the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) increased to 3.75% from 3.72% the week prior. For jumbo mortgage loans (greater than $647,200), rates climbed to 3.59% from 3.56% the week prior.
“Despite the increase in rates, refinance applications were up 18%, driven mainly by a 22% jump in conventional applications,” Kan said in a statement. “There has likely been some recent volatility in application counts due to holiday-impacted weeks, as well as from borrowers trying to secure a refinance before rates go even higher.”
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Regarding purchases applications, the average loan size hit a new record level at $441,100. “Stubbornly low inventory levels and swift home-price growth continue to push average loan sizes higher,” Kan said.
The survey showed that the refinance share of mortgage activity increased to 57.3% of total applications last week, from 55.8% the previous week. The VA apps dropped to 9.1% from 9.9% in the same period.
The FHA share of total applications decreased to 7.7% from 8.6% the prior week Meanwhile, the adjustable-rate mortgage share of activity increased from 4.4% of total applications to 4.5%. The USDA share of total applications went from 0.5% to 0.4%.
