China Slowdown: US Home Mortgage Applications Jump As Treasury Rates Drop

The global stock market decline last week spooked investors but brought some good news for U.S. homebuyers. Home mortgage applications jumped over the course of the week, fueled by Treasury interest rates that dropped briefly along with the markets.

The number of applications amounted to an 11.3 percent seasonally adjusted increase for the week over the week prior, the Mortgage Bankers Association announced Wednesday. That increase puts mortgage application totals 30 percent higher than last year.

"Although mortgage rates were unchanged for the week, Treasury rates were down sharply early in the week due to the global stock market rout, and this led to a significant increase in application volume," Mike Fratantoni, chief economist for the trade association, told CNBC.

On August 24, U.S. 10-year Treasury rates dipped down to 2.01 percent yield from six days earlier when the rates were 2.2 percent.

The decline also made room for current homeowners to refinance, and the number of mortgage-holders looking to refinance jumped by 17 percent last week. Loan applications to purchase a home were up by 4 percent, marking a 25 percent increase from the year before.

"The average size of a refinance application increased to its highest level since January," Fratantoni said.

A large portion of the new borrower applications came from so-called jumbo loan borrowers, i.e. people looking for loans for costly homes. The cost of those homes can range from around a half-million to millions of dollars.

Meanwhile, trading in China, where the market unrest began, was tumultuous Wednesday as the country prepared itself for a four-day holiday weekend. The trading session left shares down slightly after two rallies throughout the day. The Shanghai Composite Index closed at 0.2 percent down.

After two weeks of shaky international markets, U.S. investors were still concerned Tuesday as Standard & Poor's 500-stock dropped 58.33 points, or 2.96 percent. Contract prices for oil, which can indicate future market activity, also continued to drop.