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Lower rates are not giving mortgage demand any sizable boost, except when it comes to higher-end homes.
Total mortgage application volume rose 1.6 percent last week from the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. Volume was 1.8 percent higher than a year ago.
The gains came mostly from refinance volume, which is highly rate-sensitive. Refinance applications rose 4 percent for the week and were 3.5 percent higher than a year ago. Interest rates had been higher last year, but as rates now fall, more borrowers can benefit from a refinance.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.55 percent from 4.64 percent, with points decreasing to 0.42 from 0.47 (including origination fee) for loans with a 20 percent down payment. That is the lowest rate since February 2018.
"Mortgage rates declined once again last week, as concerns about the slowing global economy and status of Brexit continued to drive investors' demand for U.S. Treasurys, ultimately pushing yields lower," said Joel Kan, the MBA's associate vice president of economic and industry forecasting.
Mortgage applications to purchase a home, however, did not respond substantially. Purchase volume increased 0.3 percent for the week and was 1 percent higher than a year ago.
The average loan size, however, set a record for the third week in a row at $327, 500. The median price of a home sold in January was just $247,500, according to the National Association of Realtors.
"Entry-level housing supply remains weak and is likely hindering some would-be first-time buyers from finding a home," Kan said. "This, along with faster growth in the higher price tiers, is why the average loan application size has risen to a new high for three straight weeks."
Mortgage rates have held steady for several days, but could break out in either direction Wednesday, when the Federal Reserve updates its economic projections.
"Investors largely tune in to these for a glimpse at the collective rate hike outlook. This has caused big market movement in the past," said Matthew Graham, chief operating officer with Mortgage News Daily.