Mortgage demand is now heavily skewed toward refinancing، as interest rates declined for the fifth straight week.

Total mortgage application volume rose just 1.6% last week، compared with the previous week، according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766،550 or less) decreased to 6.43% from 6.44%، with points increasing to 0.56 from 0.54 (including the origination fee) for loans with a 20% down payment. The rate was 78 basis points higher than the same week one year ago.

A bright spot

Applications to refinance a home loan fell 0.3% for the week but were 94% higher than a year ago. That might seem like a massive increase، but it is coming off a very low number. Still، it is the one bright spot in a business that fell off a cliff due to higher interest rates and very weak homebuying.

“Refinance applications were slightly down but continued to show strong annual gains as borrowers with higher rates have been refinancing to lower their monthly payments،” said Joel Kan، an MBA economist. “The refinance share of applications averaged almost 46 percent in August، the highest monthly average since March 2022.”

Applications for a mortgage to purchase a home rose 3% for the week but are still 4% lower than the same week a year ago. Home sales have been very slow all summer، as buyers face sky-high home prices; the drop in interest rates hasn’t been enough to get them off the fence.

The small increase was led by government loan demand. FHA and VA loans offer low or no down payment options and are favored by lower-income buyers.

Mortgage rates didn’t move much Tuesday، as all eyes are on the monthly employment report and other economic data coming later in the week.