Mortgage rates in the United States retreated in the week ending June 6, leading to a rise in home purchase applications for the first time in five weeks.
The Mortgage Bankers Association's (MBA) index of mortgage applications for home purchases increased 15.6% in the week ending June 7 on a seasonally adjusted basis from the previous week. On an unadjusted basis, the index increased by 26% over the same period.
This is the first time mortgage applications to buy a home increased since May 3, the data noted.
In addition to home purchase applications, the group's refinance share of mortgages increased to 35.2% of total applications from last week's 31.1%.
"Lower rates earlier in the week meant a strong increase in refinance activity, particularly for VA borrowers, who jumped on the chance to lower their rates. Overall refinance activity was more than 27 percent above one year ago," Mike Fratantoni, MBA's SVP and Chief Economist, said in the report.
"On a seasonally adjusted basis and compared to the holiday-adjusted level from the prior week, purchase activity also increased. Multiple data sources are now indicating that home inventory levels, while still historically low, are up significantly from last year at this time. This is good news for many prospective homebuyers who have been frustrated by the lack of homes on the market," he added.
Why Home Purchase Applications Rose
The recent rise in home purchase applications rose after the contract rate on a 30-year fixed mortgage slid to 7.02%. The rate on a 15-year mortgage fell to 6.6%, according to MBA data.
In comparison, Freddie Mac's Primary Mortgage Market Survey put the contract rate on a 30-year fixed mortgage at 6.99% in the week ending June 6. The rate on a 15-year mortgage fell to 6.29%.
It is unclear whether mortgage rates will continue declining. They are, however, at risk of staying elevated until the Federal Reserve reduces their benchmark rate. A forecast from the World Bank predicted that borrowing rates would decline substantially by the end of 2026 as the inflation rate cools.
READ MORE: Home Prices and Mortgage Rates May See Declines Soon, Experts Predict