Mortgage refinancing had its strongest week since April and adjustable-rate mortgage (ARM) activity reached its highest level since 2022 last week, the Mortgage Bankers Association (MBA) reported Wednesday.

The association’s Market Composite Index, which measures mortgage loan application volume, rose 10.9% week over week on a seasonally adjusted basis. While purchase applications increased just 1% from the prior week, overall mortgage demand was propped up by a 23% jump in refinance applications.

Joel Kan, MBA’s vice president and deputy chief economist, said in a press release that borrowers responded favorably to a dip in mortgage rates, with the 30-year fixed rate averaging 6.67% according to the MBA and 6.63% per Freddie Mac. He said the refinancing surge was spurred by both conventional borrowers and Veterans Affairs (VA) loans.

“Refinances accounted for 46.5% of applications, and as seen in other recent refinance bursts, the average loan size grew significantly to $366,400,” Kan observed. “Borrowers with larger loan sizes continue to be more sensitive to rate movements.”

That 46.5% refinance share of total mortgage applications compares to a 41.5% slice the previous week. Meanwhile, the ARM share reached 9.6% after an 8.5% showing the week prior.

ARMs are loans with a variable interest rate that is periodically reset based on fluctuations in a corresponding financial index. They typically have a lower starting rate than comparable fixed-rate products.

“Given the relative attractiveness of ARM rates compared to fixed-rate loans, ARM applications increased 25% to their highest level since 2022,” Kan noted.

Buoyed by the renewed refinancing activity, the VA share of total applications increased to 14.2% versus 13.3% during the week ending Aug. 1. The Federal Housing Administration share fell one basis point to 18.4% and the U.S. Department of Agriculture share was unchanged at 0.5%.