Homebuyer demand for mortgages jumped 6%, as interest rates fell to the lowest level in over a month

Potential homebuyers are responding to lower mortgage rates and a higher supply of homes for sale. That fueled mortgage demand last week, as consumers looking to refinance pulled back.

Total mortgage application volume rose 2.8% compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. An additional adjustment was made for the Thanksgiving holiday.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.69% from 6.86%, with points falling to 0.67 from 0.70 (including the origination fee) for loans with a 20% down payment. That is the lowest rate in more than a month.

Applications for a mortgage to purchase a home jumped 6% for the week, the highest level since January. Applications were 21% lower than the same week one year ago, but there may be some noise in the annual comparison as Thanksgiving fell on a different week this year than last year.

“The recent strength in purchase activity continues, supported by lower rates and higher inventory levels, which are giving prospective buyers more options compared to earlier in the year,” said Joel Kan, an MBA economist, in a release.

Applications to refinance a home loan fell 1% for the week and were 7% lower than one year ago. Most borrowers today have loans with far lower rates than are being offered today.

“Conventional refinance applications declined despite the lower rates, but FHA and VA refinances rebounded from a week ago,” Kan added.