Mortgage refinance demand surges, as homeowners take advantage of lower interest rates

After rising at the end of the year, mortgage rates dropped sharply last week. That drove demand from current homeowners hoping to save on their monthly payments, but it did little to excite potential homebuyers.

As a result, total mortgage application volume rose just 1.2% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased last week to 6.42% from 6.58%, with points remaining at 0.73…