“The increase in purchase activity was driven by borrowers seeking larger loans, with applications for purchase loans above $417,000 increasing 16.8 percent for the week,” said Michael Frantantoni, MBA’s chief economist. “This change led to the average purchase application loan amount reaching a new record of $310,000. One factor that likely contributed to this boom in jumbo purchase applications is that the jumbo rate is now 12 basis points below the conforming rate for a 30-year fixed rate loan. This is the widest spread between these rates since March 2016.”

The spread is able to widen because banks mostly hold jumbo loans on their own balance sheets; conforming loans are sold to Fannie Mae, Freddie Mac and Ginnie Mae, where they are securitized.

“Banks adjust jumbo rates more slowly, because they’re not directly tied to actively traded securities,” said Matthew Graham, chief operating officer of Mortgage News Daily.

The average contract interest rate for 30-year fixed mortgages with conforming loan balances ($417,000 or less) increased to its highest level since January, 4.16 percent, from 3.95 percent, with points unchanged at 0.39 (including the origination fee) for 80 percent loan-to-value-ration loans. The average rate for jumbo balances, in comparison, was 4.04 percent.