In this Tuesday, July 17, 2012 photo, a single family home is offered for sale in the Hollywood area of Los Angeles. Average rates on fixed mortgages fell again this week to record lows, creating more incentive for buyers to enter the recovering housing market. Mortgage buyer Freddie Mac said Thursday, July 19, 2012, that the average rate on a 30-year loan fell to 3.53 percent. (AP Photo/Damian Dovarganes)

Low rates appear to be the driver of both refinance and purchase volume. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.65 percent from 4.66 percent, with points remaining unchanged at 0.42 (including the origination fee) for loans with a 20 percent down payment.

Mortgage application volume increased 5.3 percent last week from the previous week and was 0.4 percent higher than a year ago, the Mortgage Bankers Association said in its seasonally adjusted index that accounted for the President's Day holiday.

It's almost as if consumers didn't believe interest rates would stay low, but so far this year they have. Now, finally, consumers are responding.

"Mortgage rates were little changed last week, but as we anticipated, homebuyers are responding favorably to this more stable rate environment," said Mike Fratantoni, MBA senior vice president and chief economist.

The average rate on the 30 year mortgage ran above 5 percent at the start of November but began falling in December and has now sat in the same narrow range for several weeks. With the spring buying season just getting started, house hunters may be reacting to lower rates, even as prices are still historically high.

Mortgage applications to purchase a home rose 6 percent for the week and were 3 percent higher annually. Purchase demand is still running well below historical norms, however, as today's buyers are facing the weakest affordability levels in a decade. Home prices are still rising faster than incomes, and first-time buyers are having trouble saving for down payments due to high levels of student loan debt and high rents.

Applications to refinance a home loan increased 5 percent from the previous week and were 3 percent lower annually. Refinance volume cratered last year, so the annual comparisons are becoming smaller, simply because refinance volume has essentially flat lined at this low level. Volume did hit the highest level in a month because jumbo loan borrowers tend to be more responsive to lower rates and banks compete hard for their business, reducing rates.

"Therefore, it was not surprising to see the average rate for a 30-year fixed jumbo loan drop to its lowest level since January 2018," Fratantoni said.

Mortgage rates were largely unaffected by Tuesday's testimony from Federal Reserve Chairman Jerome Powell before Congress.

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