Plunging mortgage rates lifted the share of refinance loans by 4 percentage points in October, resulting in a seven-month high, according to a monthly survey.
In its latest Origination Insight Report, released Thursday, mortgage technology provider Ellie Mae reported that refinancing activity accounted for 40 percent of overall mortgage volume in October, marking the highest level since March. The report draws its data from a sampling of more than half of all mortgage applications initiated on the company's Encompass platform.
Refinance share has been on the rise for the past several months as average mortgage interest rates have come down. According to Ellie Mae, the average 30-year fixed rate for all loan types fell for a sixth consecutive month in October, dropping to 4.37 percent, the lowest average since July 2013.
"Low rates are creating opportunities for homeowners to either lower their payments or capitalize on their homes' equity," said Jonathan Corr, president and COO of Ellie Mae.
Despite the increase in demand, lenders were able to improve their closing time on refinance loans, bringing the average closing time to 39 days compared to 40 in September. Closing time also fell on mortgages for home purchases, declining by one day to an average 40 days.
Reviewing loan applications initiated 90 days prior, Ellie Mae calculated an overall loan closing rate of 59.4 percent in October, an improvement of more than a percentage point from September but down from August's survey high of 61.1 percent.
Both purchase and refinance closings were up, rising to 66.1 percent (a high for that category) and 49.3 percent, respectively.
The average credit profile for loans closed in October was little changed from September, with the average FICO score staying flat at 726 and the average loan-to-value ratio slipping 1 percentage point to 81 percent.
On the other hand, the average FICO score for a denied loan application last month dropped 13 points to 681, while the average loan-to-value ratio fell a point to 80 percent, Ellie Mae reported.
According to the company's data, about one-third of closed loans in October had an average FICO score under 700 compared to just 28 percent the same month last year.