Mortgage application volumes spiked 9.2% from one week earlier for the week ending Sept. 5, according to the latest figures from the Mortgage Bankers Association (MBA). The results include an adjustment for the Labor Day holiday.

Moderating mortgage rates in recent weeks spurred the uptick in mortgage activity as tracked by the MBA’s Market Composite Index, sending the seasonally adjusted Purchase Index to its highest levels since July and refinance applications soaring.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased to 6.49% from 6.64% for the week ending Sept. 5, according to MBA data, while average rates for 30-year fixed mortgages backed by the Federal Housing Administration (FHA) decreased to 6.27% from 6.31%.

“The downward rate movement spurred the strongest week of borrower demand since 2022, with both purchase and refinance applications moving higher,” commented Joel Kan, vice president and deputy chief economist at the MBA, in a press release.

With refinance applications accounting for nearly 49% of all applications last week, increased mortgage activity was especially pronounced among borrowers with larger loan balances whose monthly payments are more sensitive to rate movements, the MBA noted. The association’s Refinance Index rose 12% from the previous week and increased 34% year over year.

The FHA share of total applications decreased to 18.5% from 19.9% the week prior, while the share of applications for mortgages backed by the Department of Veterans Affairs increased to 15.3% from 13.8% the previous week.

Notably, the adjustable-rate mortgage (ARM) share of activity increased to 9.2% of total applications, as the average rate for 5/1 ARMs decreased to 5.77% from 5.9%, considerably lower than fixed rate loans, “which typically benefits homebuyers,” Kan noted.

Mortgage rates have fallen sharply since the latest MBA survey was taken.

Average 30-year fixed mortgage rates hovered at 6.29% on Wednesday morning, down roughly 25 basis points over the previous seven days, per the Mortgage News Daily Rate Index, which tracks real-time changes in lender rate sheets.

Yields on 10-year Treasury bonds that guide the rise and fall of mortgage rates have declined from 4.27% on Sept. 2 to 4.08% before markets opened Wednesday.