Interest rate volatility has dissuaded borrowers for months, but some returned to the mortgage market last week.
Mortgage application volume increased 5.1 percent from the previous week, according to the Mortgage Bankers Association's seasonally adjusted survey.
The gain was driven by applications to refinance a home loan, which rose 6 percent for the week but were still 31 percent lower than a year ago, when interest rates were lower. Refinance volume is highly sensitive to interest rate moves, and while there was no move last week, rates seem to be steadying a bit after a rocky rise.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) remained unchanged at 4.83 percent, with points decreasing to 0.48 from 0.53 (including the origination fee) for 80 percent loan-to-value ratio loans.
"It was a mixed week for rates in MBA's survey. Treasury yields finished the week slightly higher as a hawkish statement from the FOMC and market jitters caused by trade concerns and other geopolitical uncertainty offset each other," said Joel Kan, an MBA economist.
Mortgage applications to purchase a home, which are less rate-sensitive, rose 4 percent from the previous week and were 3 percent higher than a year ago.
Homebuyers are still challenged by rising home prices and a severe shortage of homes for sale, especially on the lower end of the market. That may be why the adjustable-rate mortgage share of total activity rose to 7 percent of total applications. ARMs offer lower interest rates than the 30-year fixed and can therefore help buyers who are struggling to afford a home.
Home prices will continue to rise as long as supplies are so tight. A monthly read of housing starts did show a sizable gain in single-family home construction in May, but builders are still producing far fewer homes than are needed, and what they are producing is mostly in the move-up or luxury market. The low end is the leanest.
Mortgage rates have not moved much this week but could fall if increasing tensions in the brewing trade war between the U.S. and China push investors to the safe haven of bonds. Mortgage rates loosely follow the yield on the U.S. 10-year Treasury.