Mortgage demand increased last week

Stress in the banking system turned out to be a boon for the U.S. mortgage market. As investors hid in the relative safety of the bond market, yields moved even lower last week. Mortgage rates followed.

Mortgage demand, consequently, rose 2.9% compared with the previous week, according to the Mortgage Bankers Association‘s seasonally adjusted index. The string of gains, however, could be short-lived, as rates are now moving higher again.

Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances…