Another decline in mortgage interest rates spurred a surge in loan applications last week, as reported by the Mortgage Bankers Association (MBA). The seasonally adjusted index revealed a notable 10.4% increase in total mortgage application volume compared to the previous week.

For 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less), the average contract interest rate dropped to 6.75% from 6.81%. Points increased slightly to 0.62 from 0.61 (including the origination fee) for loans with a 20% down payment, marking the lowest rate seen in three weeks.

Joel Kan, Vice President and Deputy Chief Economist at the MBA, attributed the decline in mortgage rates to the lowering of Treasury yields following incoming inflation data. This decline provided support for a notable rise in mortgage applications across all loan types.

While mortgage applications for home purchases increased by 9% for the week, they remained 20% lower compared to the same week the previous year, likely influenced by mortgage rates that were approximately half a percentage point (52 basis points) higher a year ago. Nonetheless, the recent dip in rates seemed to attract buyers.

Lower rates are also benefiting existing homeowners, with applications to refinance home loans increasing by 11% compared to the previous week and 10% higher than the same week last year. While most current borrowers already enjoy lower rates compared to current offerings, the recent decrease in rates still provides some relief for those with higher-rate loans.