New home loan application volumes managed to eke out a second straight weekly uptick, as refinances improved due to a moderating rate environment, the Mortgage Bankers Association said.

While activity came in mostly flat, borrowers showed enough interest to push the MBA’s Market Composite Index up a seasonally adjusted 0.5% for the weekly period ending May 10. The index, which measures application volumes based on surveys of MBA members, slowed from a 2.6% rate of growth seven days earlier. On a year-over-year basis, though, volumes were 7.8% lower.

The increase came as the 30-year interest rate hit its lowest point since early April, said Joel Kan, MBA vice president and deputy chief economist. The conforming rate for applications with balances eligible for sale to government-sponsored enterprises clocked in at an average of 7.08%. 

The average came in 10 basis points lower from the previous survey’s 7.18%. Points used to help borrowers buy down the rate fell to 0.63 from 0.65 for 80% loan-to-value ratio applications. 

“The decline in rates led to a small boost to refinance applications, including another strong week for VA refinances,” Kan said in a press release. 

The Refinance Index jumped 4.7%, driven by a 31.8% increase in loans coming through the Department of Veterans Affairs. Refinances were up for a second consecutive week after a 4.5% rise in the prior survey. 

Despite recent growth, “the overall level of refinance activity remains low,” Kan noted. Weekly numbers, though, ended 6.8% higher from the same period in 2023. 

Meanwhile, the seasonally adjusted Purchase Index reversed direction, dropping 1.7% week over week after its most recent 1.8% uptick. Compared to a year ago, volumes also came in 14.3% lower. 

“While the downward move in rates benefits prospective home buyers, mortgage rates are still

much higher than they were a year ago, while for-sale inventory remains tight,” Kan said.

The effect of each loan type moving in opposite directions, meant refinances took a greater 32% share of activity compared to a week earlier. In the previous survey, refinances nabbed 30.6% relative to overall volume.

Thanks to elevated VA-refinance volumes, the share of government-backed loans managed to grow. The total share of VA-sponsored mortgages accounted for 12.7% of the week’s numbers, up from 11.7% seven days earlier. But the rise was offset by applications coming from the Federal Housing Administration, with its share decreasing to 12.4% from 12.9%, primarily due to a decline in purchase. The slice of loans guaranteed by the U.S.Department of Agriculture was unchanged at 0.4% week over week.

MBA’s survey findings echo trends observed by real estate brokerage Redfin, which saw similar sluggish purchase trends in early May. Redfin’s measure of home buying demand, based on requests for tours and other services made to its agents, was down 6% month-to-month. The rate of new for-sale listings coming to market was also at its slowest in three months, as would-be sellers held back after April’s upward rate movements, according to Redfin researchers.

But interest rates began to head back downward in the early part of May, as investor sentiment has proven to pivot quickly in the past few months based on the newest economic data or comment from Federal Reserve officials.

Among MBA members, 30-year fixed rates fell across the board during the survey period, with the jumbo average retreating 9 basis points to 7.22% from 7.31% seven days prior. The typical number of points used came in 0.58, up from 0.46 for 80% LTV-ratio loans.

The contract fixed average of the 30-year FHA-backed loan equaled 6.86%, down from 6.92% the previous week. Borrower points inched up to 0.94 from 0.91.

However, the 15-year fixed rate inched up higher to an average of 6.61% compared to 6.6%. Points rose to 0.65 from 0.59.

The contract average of the 5/1 adjustable-rate mortgage, which start with a fixed 60-month term, slipped back 4 basis points to 6.56% from 6.6% week over week. At the same time, points edged up to 0.66 from 0.65. 

Meanwhile, the share of ARM applications shrank to 7% from 7.7%. ARM volumes tend to rise and fall in the same direction as fixed interest rate movements.