Refinance activity surged 21 percent last week as mortgage rates continued to set new record lows, according to the latest data from the Mortgage Bankers Association, for the week that ended Oct. 8.

“After five weeks of steadily declining rates to yet another new low, borrowers who had been on the fence jumped off,” said Michael Fratantoni, vice president of research and economics for the MBA, explaining the sudden increase. “Refinance application volumes are now close to the highest level this year,” he added.

Average contract interest rates dropped to 4.21 percent and 3.62 percent for the 30-year fixed-rate mortgage and the 15-year fixed-rate mortgage, down from 4.25 percent and 3.73 percent one week earlier.

Meanwhile, purchasing applications were down 8.5 percent week-over-week. Fratantoni noted that FHA purchasing applications fell back to normal levels after last week’s spike, which had likely been the result of buyers looking to get in ahead of new, stricter standards for FHA mortgages, which took effect Oct. 4. TRD