The average rate for a new 30-year fixed-rate mortgage has fallen to 6.54% from 6.55% the week prior

Applications to refinance a home loan surged by 35% last week compared to the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. This increase was even more pronounced, up 118%, compared to the same week last year.

Despite this surge, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) saw a slight decrease, dropping from 6.55% to 6.54%. Points, including the origination fee, fell to 0.57 from 0.58 for loans with a 20% down payment.

Although rates decreased by only 1 basis point last week, they have fallen by 33 basis points over the past four weeks and are 62 basis points lower than the same week last year.

"The refinance index had its strongest week since May 2022, driven by increases in conventional, FHA, and VA applications," said Joel Kan, an MBA economist.

Mortgage applications for purchasing a home rose by just 3% for the week and remain 8% below the same week last year. Homebuyers are contending not only with high interest rates but also with elevated home prices and low inventory. Additionally, some buyers are holding off, hoping that mortgage rates will drop further before making a purchase.

The refinance share of mortgage activity increased to 48.6% of total applications from 41.7% the previous week. A year ago, refinance applications made up only 29% of the total.

Mortgage rates began this week essentially unchanged, but this could shift with the upcoming release of the government’s monthly inflation report, the consumer price index.