Mortgage rates fell to their lowest level since November, and that sent current borrowers and potential homebuyers rushing to their lenders.
Overall mortgage application volume jumped 7.2% last week from the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. The week's results include an adjustment for the Martin Luther King Jr. holiday.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.81% from 3.87%, with points increasing to 0.28 from 0.27 (including the origination fee) for loans with a 20% down payment.
"Mortgage applications continued their strong start to the year, as borrowers acted on the drop in mortgage rates last week," said Joel Kan, an MBA economist. "Rates were driven lower by investors' increased concern about the economic impact from China's coronavirus outbreak, in addition to existing concerns over trade and other geopolitical risks."
Applications to refinance a home loan, which are most sensitive to big interest rate swings, increased 8% for the week and were 146% higher than one year ago. Last year, the 30-year fixed rate was nearly a full percentage point higher.
Mortgage applications to purchase a home increased 5% for the week and were a strong 17% higher than a year ago. Housing demand is incredibly strong right now, and real estate agents are reporting seeing much higher buyer traffic than normal. The spring season appears to have started very early. The only thing standing in the way of more home sales is the tight supply, especially at the entry level.
Mortgage rates fell further to start this week, but could react in either direction to the Federal Reserve meeting Wednesday as well as to continued updates on the severity of the coronavirus.