Lower Interest Rates Cause Mortgage Applications to Rebound

A large drop in mortgage rates last week, to the lowest levels since May, helped lift mortgage applications by +9.5% week-over-week (WoW) last week, according to data from the Mortgage Bankers Association released this morning. Purchase applications rose 6.4% WoW and demand to refinance surged +15.4% WoW. This pushed the refinace share of applications up to 36.3% from 34% the prior week. Thirty-year mortgage rates fell 33bp last week to 6.06% from 6.39% the prior week. Fifteen-year mortgage rates fell 23bp to 5.73%, and one year ARM rates fell 11bp to 7%. In July, the one-year ARM rate reached a seven-year high of 7.25%. ARMs as a percent of total loan applications fell to 6.4% last week. Over the past year, total mortgage applications have fallen -24.4% YoY, with purchase demand falling -16.8% YoY and refinanciing demand plummeting by -34.8% YoY. Demand for fixed rate loans has fallen by -18.5% YoY while demand for ARMs has tumbled by -63.6% YoY.