Wealthy borrowers behind 9.3% jump in new mortgages

A sharp drop in interest rates prompted more homeowners to refinance their mortgages last week, especially those with large loans, the Mortgage Bankers Association said Wednesday.

Total mortgage application volume increased 9.3 percent on a seasonally adjusted basis from the previous week. Interest rate-dependent refinances were almost entirely behind the gains.

A man exits a Citibank branch with window advertising for mortgages, in New York.

Scott Mlyn | CNBC
A man exits a Citibank branch with window advertising for mortgages, in New York.

Applications to refinance a home loan rose 16 percent from the previous week, seasonally adjusted, while those to purchase a home rose just 0.2 percent for the week. Purchase applications are still 25 percent higher than one year ago, indicating strengthening in future home sales; while lower rates certainly help homebuyers, they are not an immediate driver of sales. Interest rates were slightly lower one year ago.

“Treasury yields plummeted again last week amid a worsening global financial maelstrom, and mortgage rates dropped as a result,” said Michael Fratantoni, chief economist for the MBA.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to its lowest level since April, 3.91 percent, from 3.97 percent, with points unchanged at 0.41 (including the origination fee) for 80 percent loan-to-value ratio loans, according to the MBA.

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