Robin Azougi 1st R, a licensed real estate seller with Douglas Elliman Real Estate, speaks to prospective buyers at a home for sale in Floral Park, Nassau County, New York on September 6, 2020.

Wang Ying | Xinhua News Agency | Getty Images

After three consecutive weeks of decline, mortgage demand came back thanks to falling interest rates.

According to the seasonally adjusted index of the Mortgage Bankers Association, the total application volume rose 4.2% in the past week from the previous week.

Refinancing led gains, up 6% for the week. They were still 22% lower than the same week a year ago because so many borrowers refinanced last fall when interest rates hit record lows. The refinancing share of mortgage activities rose from 60.4% in the previous week to 61.7% of total applications.

The average contract rate for 30-year fixed-rate mortgages with corresponding loan balances ($ 548,250 or less) decreased from 3.15% to 3.11%, with points falling from 0.34 to 0.36 (including the initial fee) for loans with a decrease of 20% increased payment.

“Government bond yields have declined over the next several months due to uncertainty in financial markets about inflation and Federal Reserve behavior,” said Joel Kan, associate vice president of economic and industry forecasting for MBA.

Home purchase mortgage applications increased 2% in the week but were 17% lower than a year ago. Home buying has slowed recently due to huge price hikes and a low supply of home for sale. Lower mortgage rates don’t do much to offset any of these factors.

Mortgage rates skyrocketed earlier this week as bond investors await news from the Federal Reserve’s Wednesday afternoon meeting.

“The interest-friendly trend of last week has taken its course and the markets are now gearing up for it [Wednesday’s] political announcement by the Fed. That came in the form of a modest return to higher rates, “said Matthew Graham, chief operating officer of Mortgage News Daily.” While the Fed is not ready to adjust its policy rate or change its bond-buying schedule, it might be talking about the probabilities of these prospects in the future. “