NEW YORK (Reuters) - Applications for home mortgages surged last week as demand for refinancing rose to the highest level in more than three years, driven by a drop in interest rates to yet another record low, data from an industry group showed on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, jumped 16.6 percent in the week ended Sept 28.
The index of refinancing applications surged 19.6 percent, hitting the highest level since April 2009.
The gauge of loan requests for home purchases - a leading indicator of home sales - also rose, though not as strongly, gaining 3.9 percent.
The stronger demand came as mortgage rates hit fresh lows in the wake of the Federal Reserve’s latest aggressive program to boost the economy.
In a program known as quantitative easing, or QE3, the Fed said in September that it will buy $40 billion in mortgage-backed securities a month until the job market improves.
“Financial markets continue to adjust to QE3, as the ongoing presence of the Federal Reserve as a significant buyer of mortgage-backed securities applies downward pressure on rates,” Mike Fratantoni, MBA’s vice president of research and economics, said in a statement.
Fixed 30-year mortgage rates dropped 10 basis points to average 3.53 percent, down from 3.63 percent the week before.
The refinance share of total mortgage activity gained to 83 percent of applications from 81 percent the week before.
The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.
Reporting by Leah Schnurr; Editing by Leslie Adler