Applications for U.S. mortgage refinancing jumped to their highest level in 1-1/2 years last week as interest rates on 30-year home loans fell to their lowest in over three years due to a bond market rally, an industry group said on Wednesday.
The drop in mortgage rates and bond yields followed Britain’s surprise vote to exit the European Union on June 22. This stoked fears about global growth and bets on more stimulus from overseas central banks, sending U.S., U.K., European and Japanese yields to historic lows.
The Mortgage Bankers Association said its seasonally adjusted index of refinancing applications soared 20.8 percent in the week ended July 1 to its highest level since January 2015.
The share of weekly refinancing requests rose to 61.6 percent of total applications, up from 58.1 percent the prior week and its biggest share since February, the Washington-based group said.
The average rate on 30-year home mortgages fell to 3.66 percent, the lowest since May 2013, from 3.75 percent the previous week, MBA said.
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The number is less than a quarter-percentage point above the historic low of 3.47 percent recorded in December 2012.
“Interest rates continued to drop last week as markets assessed the impact of Brexit, downgrading the likelihood of additional rate hikes” by the Federal Reserve, said Mike Fratantoni, MBA’s chief economist in a statement.
Mortgage rates are poised to fall further. On Wednesday, benchmark 10-year Treasury yield touched a record low of 1.321 percent, according to Reuters data.
The surge in refinancing activity propelled total weekly applications by 14.2 percent on a seasonally adjusted basis to its highest level since June 2013, according to MBA data.
The group’s gauge on loan requests for home purchases, a leading indicator of home sales, rose 4.3 percent.