WASHINGTON–With mortgage rates falling for the first time in nearly a month—after many predictions rates would slowly rise during 2021—applications to refinance jumped 11% last week over the previous week, according to the Mortgage Bankers Association's seasonally adjusted index.
Demand was 59% higher than a year ago. The refinance share of mortgage activity increased to 71.4% of total applications from 70.7% the previous week, the MBA reported.
According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 2.92% from 2.95%. Points were unchanged at 0.32 for loans with a 20% down payment.
"The one-week reversal in the recent upswing in rates drove an increase in both conventional and government refinance activity, as borrowers continue to lock in these historically low rates," said Joel Kan, MBA's associate vice president of economist and industry forecasting in a statement. “MBA's refinance index hit its highest level since March 2020."
Mortgage Apps are Flat
Meanwhile, mortgage applications to purchase a home were essentially flat for the week, rising just 0.1%. Purchase demand was 16% higher than a year ago, but that annual comparison has been shrinking during the past month, the MBA said.
"Average purchase loan amounts in early 2021 continue to rise across all loan types, driven by a strong pace of home sales, tight housing inventory and high home price growth," Kan said. "Conventional, FHA and VA purchase loan sizes all set new survey records last week."