NEW YORK (Reuters) - U.S. mortgage applications to refinance a home increased to their highest level in 11 weeks as home borrowing costs declined to their lowest levels since November, the Mortgage Bankers Association said on Wednesday.
Requests for home loans in Texas were reduced by more than a fifth from the previous week in the aftermath of Hurricane Harvey, the most powerful storm to slam that state in over 50 years. However, the drop did not have a meaningful impact on overall application volume.
Mortgage rates have fallen since mid-July in step with bond yields as hopes faded for tax reform, infrastructure spending and other fiscal stimulus from Washington in 2017. Tensions between North Korea and the United States and its allies over the former’s nuclear weapon program has compounded the decline in bond yields.
“Heightened geopolitical tensions last week brought mortgage rates to their lowest level since the 2016 (U.S. presidential) election,” Joel Kan, an economist with the Washington-based industry group said in a statement.
Last week, the average interest rate on conforming 30-year fixed-rate mortgages fell to 4.06 percent, a nine-month low, from 4.11 percent the prior week, the MBA said.
Average rates on other types of home loans that the MBA tracks were anywhere from 2 basis points to 12 basis points lower.
Lower borrowing costs revived home owners’ interest in refinancing their existing loans.
MBA’s seasonally adjusted index on mortgage refinancing activity rose 5.1 percent to 1,502.6 in the week ended Sept. 1. This was the strongest since 1,526.8 in the week of June 16.
The share of refinancing requests versus total applications grew to 50.9 percent, the biggest since January 2017, from 49.4 percent a week ago.
The MBA’s barometer on total mortgage applications adjusted for seasonal factors rose 3.3 percent to 420.5 last week.
Lower borrowing costs stemmed a further decline in loan demand to buy a home.
MBA’s seasonally adjusted gauge on purchase mortgage activity, a proxy on future home sales, edged up 1.4 percent to 227.3 after hitting a six-month low the prior week. Purchase loan applications, not accounting for seasonal factors, slipped over 1 percent.
On an unadjusted basis, purchase mortgage and refinancing activity in Texas declined by 21.7 percent and 22.9 percent last week, according to Kan.
Reporting by Richard Leong; Editing by Chizu Nomiyama