Interest rates for 30-year, fixed-rate mortgages dropped from 4.57 percent to 4.45 percent with points falling from 1.14 to 0.78. Rates for 15-year, fixed-rate contracts dropped from 3.67 percent to 3.52 percent with points falling from 1.08 to 1.02, the association said.
The banking group said its weekly mortgage activity index rose 7.1 percent, while the refinancing index rose 7.8 percent.
Mortgage rates fell sharply following Treasury rates, which "plummeted more than 20 basis points last week as all eyes were focused on the debt ceiling negotiations in Washington," said MBA vice president of research and economics Michael Fratantoni.
The distraction, combined with weak economic data, put the average 15-year mortgage rate at a new low for the MBA weekly survey.