The MBA's Market Composite Index, a measure of loan application volume based on surveys of the trade group's members, jumped a seasonally adjusted 6.9% for the period ending Aug. 2. The spike reversed a two-week slide in applications, while compared to the same seven days in 2023, volumes also finished 10.6% higher.   

"Mortgage rates decreased across the board last week, and mortgage application volume reached its highest level since January of this year," said Joel Kan, MBA vice president and deputy chief economist, in a press release. 

The conforming 30-year fixed interest rate among MBA lenders fell 27 basis points to 6.55% from 6.82% week over week. Points used to help buy down the rate shrank to 0.58 from 0.62 for 80% loan-to-value ratio applications.

The rate was pushed downward following remarks coming from the Federal Reserve and a weaker-than-expected jobs report. The combined effect "added to increased concerns of an economy slowing more rapidly than expected," Kan noted. 

"As a result of lower rates, refinance applications increased across all loan types," he said. 

The Refinance Index accelerated 15.9% from the prior survey period, with a significant 36.2% rise coming through Department of Veterans Affairs programs, continuing a pattern seen over the past few months. Compared to the same week in 2023, the index leaped 59%. Alongside the growth in volume, the average refinance-application size came in at $312,400, landing above the $300,000 mark for the first time this year. 

The surge lifted MBA's index to a two-year peak. Other industry measures, including Fannie Mae's Refinance Application-Level Index, which sources data through the enterprise's automated underwriting system, showed a similar spike. 

Twice as many borrowers today are in the money for a refinance today compared to a year ago, ICE Mortgage Technology said last week. Recent activity has housing researchers pointing to the likelihood of elevated refinance activity if rates continue to fall below certain benchmarks. 

Based on developments early this week, the current pace of lending may stick over the next few days. Yields from 10-year Treasurys, which mortgage rates regularly correspond to, plunged on Monday, leading to growing worries of a rapidly slowing U.S. economy. In turn, investors, both domestically and abroad, shifted their focus away from stocks to the bond market. 

"If the recent drop in longer-term rates is sustained, then we expect to see another uptick in refinance applications and subsequent refinance mortgage volumes this week," said Fannie Mae Chief Economist Doug Duncan. 

As the refinance market saw borrowers return, purchases also picked up, albeit at a more subdued rate of growth. The MBA's Purchase Index rose a seasonally adjusted 0.8% from the previous week. Year over year, volume was 10.7% lower, though.  

"Despite the downward movement in rates, purchase activity only saw small gains, with an increase in conventional purchase applications offset by decreases in government purchase applications," Kan said. 

"For-sale inventory is beginning to increase gradually in some parts of the country and home buyers might be biding their time to enter the market given the prospect of lower rates."

The share of refinances versus purchases came in at 41.7% to 58.3%. Refinances relative to total volume expanded from 38.2% a week earlier. 

Meanwhile, the share of adjustable-rate mortgage applications grew to 6.3% from 5.7%, proving an exception from the norm. Consumer interest in ARMs, which start with fixed terms before adjusting to market levels, tend to rise and fall in the same direction as fixed rates, 

While the government-sponsored market also saw elevated activity, the share of federally backed loans remained mostly flat week to week. Applications coming through the Federal Housing Administration accounted for 13.4%, dropping from 14.2%. The decrease was offset by growth in VA-guaranteed mortgages, which garnered 14.3% compared to 13.5% a week earlier. Loans coming from the U.S. Department of Agriculture represented a small 0.4% slice, down from 0.5% in the prior survey.