The Mortgage Bankers Association’s index of applications to buy a home or refinance a loan rose a whopping 22.5 percent last week, the largest increase in more than three years.
The surge in applications was led by refinance volume which jumped 31.9 percent and purchase volume which increased 15.2 percent.
The MBA’s seasonally adjusted index of mortgage applications stood at 791.8 for the week ended November 30, its highest point since July 2005.
The refinance share of applications increased to 56 percent from 51.4 percent the previous week, while the ARM share of activity decreased to 11.6 percent, down from 14.6 percent the previous week.
Mortgage application volume last week was up 24.2 percent compared to the same week a year ago.
It is believed that the surge in activity is tied to the sharp drop in interest rates, which hit two-year lows last week.
The average interest rate for a 30-year fixed-rate mortgage decreased to 5.82 percent from 6.09 percent a week earlier, its largest weekly drop since 2003.
Conversely, the average rate for a one-year adjustable-rate mortgage increased to 6.28 percent from 6.24 percent the previous week.
But one analyst wasn’t so bullish on the news, attributing much of the supposed strength to the difficult lending climate.
“No one can securitize a mortgage and no one wants to lend any money, so at the end of the day that results in people desperate to get a loan and so they are sending in as many applications as they can,” said Torsten Slok, senior economist at Deutsche Bank in New York.
“It is just a reflection of people having a harder time getting a mortgage.”
“Everything else around the housing market is still looking terrible, so I have a really hard time believing the data is positive news,” Slok added.
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