Mortgage rates drop to lowest since October, spurring demand

US mortgage rates fell to the lowest level since October, spurred by a rally in government bonds in the wake of an escalating trade war and driving home purchase applications to a more than one-year high.

The contract rate on a 30-year mortgage decreased 9 basis points to 6.61% in the week ended April 4, according to Mortgage Bankers Association data released Wednesday. The rates on 30-year jumbo and 15-year fixed mortgages also declined.

Cheaper borrowing costs also sparked a 35% surge in an index of refinancing, which reached the highest level since October. The gauge of mortgage applications for home purchases advanced more than 9%, marking the sixth straight weekly advance.

Mortgage rates track 10-year Treasury note yields, which fell below 4% last week for the first time since before the election as President Donald Trump's sweeping tariff announcement sparked recession fears and a stock market rout.

While the strength of purchase activity may help temper concern of a rapid pullback in consumer demand, economists say economic activity is still at risk of a notable slowdown as tariffs threaten to boost inflation and hinder investment.

The MBA survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts. The data cover more than 75% of all retail residential mortgage applications in the US.