Mortgage volume finally made a move, jackhammered out of three stagnant weeks by a drop in interest rates.
Total applications increased 4.7 percent on a seasonally adjusted basis for the week ending July 31, versus the previous week, according to the Mortgage Bankers Association (MBA).
Rate-sensitive refinances led the charge, jumping 6 percent for the week. Refinance volume, however, is just 8 percent higher than one year ago. Mortgage applications to purchase a home rose 3 percent for the week but are now 23 percent higher than the same week one year ago.
"Despite recent concerns about the economy, both purchase and refinance applications increased strongly in response to lower interest rates last week. Refinance activity was the highest since May when rates were last at this level," noted Lynn Fisher, MBA's vice president of research and economics. "The increase in purchase activity was also notable for this time of year."
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.13 percent, its lowest level since May, 2015, from 4.17 percent, with points decreasing to 0.34 from 0.36 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, according to the MBA.
The average loan size, which had been trending down, edged back up slightly. Lower rates give buyers more purchasing power.
The gains may be short-lived, as mortgage rates moved higher Tuesday. Friday's employment report, however, will be a major factor in deciding rates over the next few weeks. Rates still take a back seat to mortgage credit availability, which the housing industry claims are still too tight and continue to hold back a more robust housing recovery.
Banks did report having eased lending standards slightly for a number of categories of residential mortgage loans over the past three months, according to the Federal Reserve's July 2015 Senior Loan Officer Opinion Survey on Bank Lending Practices, released Monday.
The only exception was in government-insured loans. The easing was more pronounced for jumbo residential mortgages that conform to the Consumer Financial Protection Bureau's qualified mortgage rules, according to the survey. It also noted stronger demand across most categories of home purchase loans.