Mortgage applications increased 2.3% on a seasonally adjusted basis in the first week of February over the week before, according to a weekly survey by the Mortgage Bankers Association (MBA). Refinances accounted for 40% of all new applications.

Interest rates fell for the third straight week last week, reaching an average of 6.89% for a 30-year fixed rate mortgage, down from a high this year of 7.04% in mid-January, according to Freddie Mac.

“Mortgage rates moved slightly lower last week, which led to the pace of refinance applications reaching its strongest week since October 2024,” said Joel Kan, MBA’s vice president and deputy chief economist, in a statement

Purchase applications were down from the previous week’s level but were slightly ahead of last year’s pace.

Kan said the average loan size for refinance borrowers increased, noting these borrowers tend to be more responsive for rate changes.

The average loan size for a purchase application increased to its highest level since March 2022 at $456,100, partially driven by fewer Federal Housing Administration (FHA) purchase applications but more U.S. Department of Veterans Affairs (VA) loans compared to the previous week.

On an unadjusted basis, the MBA’s Market Composite Index, a measure of mortgage loan application volume, increased 6% in the first week of February compared with the previous week. The Refinance Index increased 10% from the previous week and was 33% higher than the same week one year ago.

The seasonally adjusted Purchase Index decreased 2% from one week earlier. The unadjusted Purchase Index increased 4% compared with the previous week and was 2% higher than the same week one year ago.

The FHA share of total applications decreased to 16% from 16.2% the week prior. The VA share of total applications increased to 14.6% from 13.3% the week prior. The U.S. Department of Agriculture share of total applications remained unchanged at 0.5% from the week prior.