Mortgage application volumes experienced another strong increase last week as lower costs sparked a surge in refinance demand.
The Mortgage Bankers Association's (MBA) weekly applications index climbed a seasonally adjusted 14.2 percent on a weekly basis for the week ending January 16, the group said Wednesday. The increase, which followed a 49 percent jump the week prior, put applications at their highest level since June 2013.
Leading the weekly improvement was a 22 percent increase in refinance applications, which MBA Chief Economist Mike Fratantoni said was largely due to a drop in mortgage rates to an average 30-year fixed rate of 3.80 percent, the lowest level on MBA's measure since May 2013.
Mortgage rates weren't the only factor influencing refinance demand, though.
"[T]he recent reduction in [Federal Housing Administration] mortgage insurance premiums also played a role: FHA refinance applications increased 57 percent last week," Fratantoni said.
Despite the jump, refinances accounted for only about 48 percent of FHA volume last week. That compares to 73 percent of Veterans Affairs (VA) applications and 77 percent of conventional loans.
Taken all together, refinance applications made up 74 percent of total application volumes, up from 71 percent in early January.
Applications for home purchases, on the other hand, fell on a seasonally adjusted basis, declining 3 percent week-over-week. Unlike refinances, purchase applications apparently didn't see much lift from the mortgage premiums announcement: FHA purchase applications were down 1 percent for the week.