Interest rates are at their lowest in months, increasing demand for mortgages

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Consumers have returned from the holidays to find mortgage rates at their lowest point since September, and they’re responding dramatically.

Mortgage application volume rose nearly 28% from last week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages fell from 6.42% to 6.23% for payments ($726,200 or less).

Rates hit a recent high of 7.2% at the end of October in MBA’s survey, but ended the year at 6.58%. A year ago, the 30-year fixed average rate was 3.64%.

Refinancing demand was the biggest mover, up 34% from the previous week, but it was 81% lower than the same week a year ago. The refinancing share of mortgage activity increased to 31.2% of total applications from 30.7% in the previous week.

Applications for a mortgage to buy a home rose 25% week-on-week, but were down 35% from the same week a year ago.

“As we enter early spring, lower mortgage rates and more homes on the market will help affordability for first-time homebuyers,” said Mike Frattentoni, MBA’s senior vice president and chief economist.

However, the market did not see any uptick in inventories. According to real estate brokerage Redfin, the number of active listings is up about 21% from a year ago. That’s because homes are now sitting on the market longer, with fewer sales. New listings of homes for sale are down 22% year over year.

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