Mortgage rates again fell to an all-time low last week and home buyers are rushing out to take advantage. Mortgage applications to purchase a home rose 5% last week, putting applications for home purchases 18% higher than a year ago, the Mortgage Bankers Association reports from its seasonally adjusted index.
This marks a strong rebound in applications. Six weeks ago, the COVID-19 outbreak brought mortgage applications down 35% compared to last year.
As states reopen, more home buyers are entering the housing market. Mortgage application indexes are viewed as a gauge for future home-buying activity.
“The pent-up demand from home buyers returning to the market continues to support a recovery from the weekly declines observed earlier this spring,” says Joel Kan, an MBA economist. “However, there are still many households affected by the widespread job losses and current economic downturn. High unemployment and low housing supply may restrain a more meaningful rebound in purchase applications in the coming months.”
The average contract interest rate for a 30-year fixed-rate mortgage decreased to a record low last week—3.37%, the MBA reports.
The low rates are proving a boon for the purchase market but aren’t drawing out more refinancers. Mortgage applications to refinance a home dropped 9% last week, marking the seventh consecutive week of the decline. That said, refinance applications are still 137% higher than a year ago, when interest rates were 86 basis points higher.