(Bloomberg) -- US mortgage refinancing surged last week by the most since the early days of the pandemic as borrowing costs continued to drift lower.
The Mortgage Bankers Association’s refinancing index jumped 34.5% to a more than two-year high of 889.3. Mortgage applications to purchase a home climbed 2.8% in the week ended Aug. 9, the largest advance since the first week of June.
The contract rate on a 30-year fixed mortgage eased 1 basis point to 6.54%, the MBA data showed Wednesday. The rate on a 15-year fixed mortgage dropped 7 basis points to 5.96%, the lowest since May of last year.
The 15-year fixed mortgage is now 8 basis points lower than the rate on a five-year adjustable mortgage, the largest difference since January 2022.
MBA’s overall index of applications, which includes refinancing and purchase activity, jumped 16.8% last week — the most since January last year.
Mortgage rates track US government securities, and the yield on the 10-year Treasury note has rebounded after sliding in the previous week to the lowest level this year.
Investors have trimmed expectations that the Federal Reserve will undertake more aggressive interest-rate reductions, though they still expect policymakers will begin reducing borrowing costs at their September meeting.
Despite mortgage rates holding below 7%, still-rising housing prices are limiting purchase activity. Figures out Tuesday from the National Association of Realtors showed prices rose 4.9% in the second quarter from the same period a year ago.
In 48% of US markets, an income of at least $100,000 is required to afford a mortgage with a 10% down payment, according to the NAR. In the first quarter, that was the case in 40.7% of the nation’s real estate markets.
The MBA survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts. The data cover more than 75% of all retail residential mortgage applications in the US.
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