After a brief lull to start the month, mortgage demand surged ahead yet again — even with the highest interest rates in several weeks.
Total mortgage application volume increased 6.8% last week from the previous week, according to the Mortgage Bankers Association's seasonally adjusted index.
Refinance demand came roaring back, up 9% for the week and 86% annually. While millions of borrowers already have refinanced over the past year, millions more could benefit, as rates bounce around near record lows. The refinance share of mortgage activity increased to 64.3% of total applications from 62.8% the previous week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $510,400 increased to 3.10% from 3.07%, with points and origination fee increasing to 0.46 from 0.32 for loans with a 20% down payment. The rate was 92 basis points higher a year ago.
"Mortgage applications activity remained strong last week, even as the 30-year fixed-rate mortgage and 15-year fixed-rate mortgage increased to their highest levels since late August," said Joel Kan, an MBA economist. "Both conventional and government refinance activity, and in particular FHA refinances, picked up last week."
Mortgage applications to purchase a home rose just 3% for the week but were 25% higher than one year ago. Buyers continue to flood the market despite higher home prices and very tight supply. Sales have been strongest on the high end of the market, according to the National Association of Realtors, as consumers seek larger high-tech homes for work and school. That is also where the supply available for sale is greatest.
Realtors report their clients saying that, "work from home will be in place long after the pandemic is over," said Lawrence Yun, chief economist for the Realtors.
The median price of an existing home sold in August hit yet another record high, which is also reflected in mortgage demand.
"The demand for higher-balance loans pushed the average purchase loan size to another record high. The strong interest in homebuying observed this summer has carried over to the fall," Kan said.