U.S. mortgage applications rose sharply last week, fueled by a surge in home refinancing loans as interest rates sunk to their lowest levels in more than a year, an industry trade group said.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and purchasing loans, increased 8.1% to 647.6 for the week ended Dec. 1 from the previous week's 599.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 5.98%, down 0.15 percentage point from the previous week, the lowest since the week ended Oct. 7, 2005, when it stood at the same level. Interest rates were also below year-ago levels of 6.32%.
Fueling the rise last week was a 13.7% rise in the MBA's seasonally adjusted index of refinancing applications to 1,989.7. A year earlier the index stood at 1,596.4.
The refinance share of applications increased to 50.1% from 46.9% the previous week, its highest since April 2004.
Demand for home purchase loans was also robust.
The MBA's seasonally adjusted purchase index, widely considered a timely gauge of U.S. home sales, rose 4.9% to 426.6, its highest since May. However, the week's purchase index reading was substantially below its year-ago level of 495.1.
Fixed 15-year mortgage rates averaged 5.66%, down from 5.86%, its lowest since January. Rates on one-year adjustable-rate mortgages (ARMs) decreased to 5.79% from 5.87%, its lowest since March.
The ARM share of activity decreased to 23.9% of total applications from 24.5% the previous week, its lowest since October 2003.
The MBA's survey covers about 50% of all U.S. retail residential loans. Respondents include mortgage banks, commercial banks and thrifts.