U.S. residential mortgage refinancing activity climbed to a six-month high last week, a trade group said on Wednesday, fueled by a third straight weekly drop in borrowing costs on the heels of a pair of major bank collapses that have clouded the outlook for interest rates.
The Mortgage Bankers Association’s weekly index of overall home loan application volumes climbed 2.9% to notch a fourth week of gains, the longest up-streak in four years. The increase was led by a 4.8% rise in applications to refinance an existing loan, which brought that activity to its highest level since last September and furthered the distance from a two-decade low hit at the end of last year. Applications for loans to purchase a home rose 2%.
The average contract rate for a 30-year, fixed-rate mortgage, the most popular home loan, fell to a six-week low of 6.45%, MBA said.
“While the 30-year fixed rate remained 1.65 percentage points higher than a year ago, homebuyers responded, leading to a fourth straight increase in purchase applications,” MBA Vice President and Deputy Chief Economist Joel Kan said in a statement. “Homeprice growth has slowed markedly in many parts of the country, which has helped to improve buyers’ purchasing power.”
The Federal Reserve’s rapid interest rate increases over the last year – aimed at lowering inflation from the 40-year highs touched last summer – broadsided the housing market, driving mortgage rates to a peak above 7% last fall, driving home sales lower and bringing lending for both new purchases and refinancings to a near standstill.
