By Poroma Pant

Responding to a drop in interest rates, consumers stepped up their mortgage applications last week, a trade group reported Wednesday.

Mortgage applications increased 9.3 percent from one week earlier, on a seasonally adjusted basis, according to the Mortgage Bankers Association’s latest Weekly Mortgage Applications Survey.

The 30-year fixed-rate mortgage on confirming loans fell to 3.91 percent from 3.97 percent, marking the lowest rate since April 2015, according to the MBA.

30-Year Fixed Mortgage Rates from 2008

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While the dip in mortgage rates was welcome, it reflects the recent turmoil in financial markets.

“Treasury yields plummeted again last week amid a worsening global financial maelstrom, and mortgage rates dropped as a result,” Michael Fratantoni, Chief Economist for the MBA, said in a note.

The MBA tracks two types of mortgage applications, one which measures refinancing of existing mortgages and another for new home purchases.

The latest report makes it clear that the recent upturn can be attributed to refinancing activity. The MBA said its Refinance Index rose 16 percent from the previous week, while applications for home purchases rose just 0.2 percent.

Still, purchase-related mortgage applications are 25 percent higher than a year ago, reflecting growth in home sales.

“Both the yearly figure and the weekly increase, though small, is a good sign. While it does not indicate recovery, the recent drop in interest rates combined with increasing purchasing power leads to a more stable market,” said Keith Stewart, a mortgage consultant at NorthPoint Lending Group, Inc.

The average loan size on applications was the second highest in the history of the survey at $303,000, with the refinance loan size of $302,000 at its second highest level ever, the MBA said.