The Mortgage Bankers Association reported that applications increased 5.2% from the week prior for the week ending on October 4.
Also, the refinance index rose 10% from the week prior and is 163% higher than it was year-over-year. The seasonally-adjusted purchase index fell 11% week-over-week, but was 10% higher from the same time last year.
"U.S. Treasury rates moved sharply lower last week, as data showing weakness in the services sector was a sign that slowing economic growth is not confined to the manufacturing sector. This in turn caused a flight to safety by investors, resulting in mortgage rates dropping across the board, with the 30-year fixed rate decreasing nine basis points to 3.9%—the lowest level in a month," said Joel Kan, AVP of Economic and Industry Forecasting for the MBA. "As seen a few times this year, the large drop in rates caused another surge in refinance applications. The refinance index increased 10% to its highest level since late August, with both conventional and government refinances experiencing an upswing."
The MBA also reported that the refinance share of mortgage activity increased to 60.4% of total applications from 58% the week prior.
"Purchase activity was muted, declining almost 1 percent, but was still 10 percent higher than a year ago,” Kan said. “Despite low rates, the cloudier economic outlook and ongoing market uncertainty may be keeping some potential homebuyers away from the market this fall."
The good news for mortgages continued, as the MBA also revealed the availability of mortgage credit increased in September, according to the Mortgage Credit Availability Index (MCAI). The MCAI rose by 0.9% to 183.4 for the month. Increase in the index are indicative of loosening credit.
The MCAI was benchmarked to 100 in March 2012.
While Fannie Mae’s latest Home Purchase Sentiment Index (HPSI) fell 2.3 points in September, Doug Duncan, SVP and Chief Economist at Fannie Mae, said consumer sentiment remains relatively strong despite uncertainty over the economy and “individual financial circumstances” than the prior month.
"Views about the direction of the economy held relatively steady, and the share of respondents who say it's a good time to buy or sell a home rose slightly. However, consumers who are pessimistic about current housing market conditions are more likely to cite unfavorable economic conditions than the prior month,” Duncan said. “Job confidence remains high but still well shy of its July reading. Despite some added uncertainty, the September HPSI indicates continued strength in housing market attitudes and is consistent with recent data on housing activity."