U.S. mortgage refinancing got its biggest boost in the more than a year last week from a sharp drop in interest rates earlier this month, as homeowners, who may have missed out on last summer’s record low rates rushed to refinance.
“We just got a shot in the arm,” said Bob Moulton, president of Americana Mortgage Group Inc., a mortgage broker in Manhasset, New York. “I had a lot of people sitting on the fence, and it (the rate drop) was a catalyst for them.”
According to the Mortgage Bankers Association, a Washington trade group, weekly refinancing activity posted its biggest weekly increase in a little more than a year and reached its highest level in nearly eight months.
The group’s mortgage refinancing index, after adjusting to seasonal factors, for the week ending March 12 surged by 39.7 percent to 4,983.7 from previous week’s 3,567.6.
The refinancing index came at the high end forecast by analysts who had estimated the index likely rose to mid-4,000 to 5,000.
Last week’s mortgage rates averaged slightly higher than previous week’s levels, but borrowers, who filed their applications last week, were not discouraged by the slight increase in the rates, industry players said.
Average interest rates on 30-year mortgages, excluding fees, rose 3 basis points to 5.37 percent, but are still 24 basis points lower than the comparable week a year earlier.
Mortgage rates fell sharply in early March as a report of surprisingly weak U.S. job growth in February, fanned hopes that the Federal Reserve would leave short-term rates unchanged throughout the year, and perhaps until 2005.
On Tuesday, Fed policymakers, as expected, decided to keep its target for the federal funds rate, benchmark for U.S. short-term rates, at its post 1958-low of 1.00 percent until they see stronger evidence of jobs growth.
A revitalized refinancing sector boosted overall demand for mortgages last week.
The mortgage association said its seasonally adjusted market index, a measure of weekly mortgage activity, jumped last week by 25.6 percent to 1,117.1 from prior week’s 889.1,
The group’s market and refinancing indices posted their biggest point gains in a little over a year. They also reached their highest levels since the week of July 18, 2003 when they were at 1,284.3 and 6,181.2, respectively.
Meanwhile, the group’s purchase index, a gauge of new loan requests for home purchases, rose by a modest 5.6 percent to 452.4 from 428.6 in the prior week.