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Mortgage applications to purchase a home increased 6 percent last week from the previous week, according to the Mortgage Banker Association's seasonally adjusted purchase index.
Purchase activity was only 1.5 percent lower than a year ago, a significant recovery from just six weeks ago when it was 35 percent below last year's level.
"Applications for home purchases continue to recover from April's sizeable drop and have now increased for five consecutive weeks," Joel Kan, MBA's associate vice president of economic and industry forecasting, said in a statement.
Record low mortgage rates and strong pent-up demand from before the pandemic started helped to spur the homebuyers.
"As states gradually reopen and both home buyer and seller activity increases, we will be closely watching to see if these positive trends continue, or if they reflect shorter-term, pent-up demand," Kan said.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $510,400 decreased to 3.41 percent from 3.43 percent. Points, including the origination fee, increased to 0.33 from 0.29 for 80 percent loan-to-value ratio loans.
Still, low rates are not driving existing homeowners to refinance their mortgages, according to the Wednesday survey. Refinance applications fell 6 percent for the week, although it was still 160 percent higher compared to the same period last year.
"The average loan amount for refinances fell to its lowest level since January - potentially a sign that part of the drop was attributable to a retreat in cash-out refinance lending as credit conditions tighten," Kan said. "We still expect a strong pace of refinancing for the remainder of the year because of low mortgage rates."