Refinance applications continued to drive mortgage activity over the past week amid small fluctuations in average interest rates, according to new figures from the Mortgage Bankers Association (MBA).

The MBA’s Market Composite Index, a measure of mortgage loan application volume, notched slight 0.4% growth on a seasonally adjusted basis for the week ending Feb. 20, led by a higher share of refinance activity that rose to 58.6% of total applications, up from 57.4% of applications the previous week and 56.4% the week before that.

Application volumes in the refinance component index increased 4% from the previous week to land 150% higher than the same week one year ago.

Joel Kan, deputy chief economist at the MBA, noted in a statement accompanying Wednesday’s data that average rates for 30-year fixed-rate mortgages hit their lowest mark since September 2022 last week, incentivizing current borrowers to lower their monthly payments but failing to generate growth in purchase applications.

“Purchase applications were down over the week but were 12% higher than a year ago,” said Kan, “as the combination of lower rates and improving affordability conditions continue to support stronger demand than last year.”

Purchase activity has been slow to start the year, despite friendlier market conditions than many sidelined buyers have faced since the end of the COVID-19 pandemic. The annual pace of existing-home sales was 4.4% lower over the year in January, while contract signings in January that foreshadow closed sales in February were down 0.4% annually.

The MBA’s seasonally adjusted purchase component index showed 5% fewer applications from homebuyers last week compared to the week prior.

Average rates for 30-year fixed-rate mortgages with conforming loan balances slid eight basis points over the week to 6.09%, according to MBA data, while average rates for 30-year loans insured by the Federal Housing Administration (FHA) dipped to 5.97% from 5.99% the previous week.

The FHA share of total applications fell to 16.1% from 18.4% the previous week, while demand for home loans backed by the Department of Veterans Affairs grew to 18.7% of overall applications, up from 16.5% the week prior. Kan noted a 26% increase in VA refinances over the week and a favorable rate environment for adjustable-rate mortgages (ARMs).

“The ARM share stayed above 8%,” he said, “as ARM rates remained more than 80 basis points below conforming fixed rates. This is giving payment-sensitive borrowers or those seeking larger loans an incentive to choose this product offering.”