Refinance demand was boosted by the fact that mortgage rates were lower for the second week in a row. The result was that the average mortgage application volume increased 5.5% last Wednesday compared to the week before, according the Mortgage Bankers Association seasonally adjusted index.

Average contract interest rates for 30-year fixed rate mortgages (with conforming loan balances of $554,250 or less), decreased from 3.24% to 3.16%. Points remained unchanged at 0.34 (includes origination fee) on loans with 20% down payments. Although it has dropped 14 basis points in two weeks, the average rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) is unchanged at 0.34 (including the origination fee) for loans with a 20% down payment.

The week-to-week rate changes are highly sensitively affecting refinance demand. Last week, it rose by 7%. This was however 28% more than the previous year. Refinance activity accounted for 63.5% more mortgage applications than 61.9% in the week prior.

Joel Kan, an MBA economist, stated that “though activity is still low in January 2020, many homeowners took advantage of the drop in rates.” “Additionally the average loan amount for refinance applications was at its highest within a single month.”

The week saw an increase in mortgage applications for home purchases of 3%, but they were still 4% below the previous week. While the market for housing is entering a slower season and demand is higher than normal, buyers still have to deal with a limited and costly market. Although some buyers may have been redirected by the rate drop, they are not buying as much power today due to high costs.

To start the week, mortgage rates were slightly lower. The rates have risen to their best level since late September.