• The average contract interest rate for 30-year fixed-rate mortgages decreased last week to 2.92% from 2.95%.
• The Mortgage Bankers Association's refinance index hit its highest level since March.
• Mortgage applications to purchase a home were essentially flat for the week, rising just 0.1%.

Mortgage rates fell for the first time in nearly a month, and that lit a fire under current borrowers who may have thought they missed the boat on refinancing their loans.

Applications to refinance jumped 11% last week from the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. Demand was 59% higher than a year ago. The refinance share of mortgage activity increased to 71.4% of total applications from 70.7% the previous week.

The move was spurred by a decline in interest rates. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) decreased to 2.92% from 2.95%. Points were unchanged at 0.32 for loans with a 20% down payment.

"The one-week reversal in the recent upswing in rates drove an increase in both conventional and government refinance activity, as borrowers continue to lock in these historically low rates," said Joel Kan, MBA's associate vice president of economist and industry forecasting. "MBA's refinance index hit its highest level since March 2020."

Buyers were less impressed by the drop in rates and likely more frustrated by overheated home prices and a record-low supply of homes for sale.

Mortgage applications to purchase a home were essentially flat for the week, rising just 0.1%. Purchase demand was 16% higher than a year ago, but that annual comparison has been shrinking during the past month.

Supply is leanest at the low end of the housing market, and more plentiful at the higher end. That is showing up quite clearly in the amounts borrowers are applying for.

"Average purchase loan amounts in early 2021 continue to rise across all loan types, driven by a strong pace of home sales, tight housing inventory and high home price growth," Kan said. "Conventional, FHA and VA purchase loan sizes all set new survey records last week."

CORRECTION: This article has been updated to reflect that the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) decreased to 2.92% from 2.95%.