Mortgage rates fell again last week, and while the drop wasn’t big, it was enough to prompt current homeowners to look for savings. According to the Mortgage Bankers Association’s seasonally adjusted index, the increase in refinances drove a 5.4% increase in overall mortgage demand compared to the previous week.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased from 6.69% to 6.67%, with points on loans at 20% down from 0.67 to 0.66, inclusive the processing fee) decreased payment. That was the third consecutive weekly decline.

The number of applications to refinance a home loan increased 27% week-over-week and was 42% higher than the same week a year ago. The percentages are large, probably because the base volume is still so small. Most borrowers today have mortgages at interest rates well below what is currently being offered. From 2020 to the first half of 2022, rates were below 4%. Mortgage rates last week were 40 basis points lower than the same week a year ago.

The refinance share of mortgage activity increased to 46.8% of all applications from 38.7% the previous week.

Mortgage applications to purchase a home fell 4% for the week and were 4% higher than the same week a year ago. Demand from homebuyers had increased in recent weeks as more inventory came onto the market.

“Purchase applications remained relatively strong, posting annual increases in all but one week of the past three months. In addition to lower interest rates, buying activity continues to be supported by continued demand for housing and inventory, which continues to grow incrementally in many markets,” wrote Joel Kan, an MBA economist, in a press release.

Mortgage rates rose 10 basis points earlier this week, according to a separate survey from Mortgage News Daily. This offset much of last week’s decline. However, they could swing one way or the other on Wednesday with the release of the monthly Consumer Price Index, an indicator of inflation.

“There’s no question that Wednesday morning’s CPI data is the last important piece of the puzzle the Fed will receive before deciding whether or not to cut next week,” wrote Matthew Graham, chief operating officer at Mortgage News Daily. “Of course the market knows this. So a big deviation from the forecasts would definitely be enough to get things going.”