Mortgage demand picked up last week as lower interest rates steered homebuyers back into the market, but activity remains weaker than a year ago because of limited inventory.

Mortgage applications increased by 3.7% during the week ending Feb. 2 on a seasonally adjusted basis, according to the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey.

“​​Rates at these levels have not prompted much of a reaction in the refinance market, as most homeowners have mortgages with much lower rates,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement. “However, purchase activity has been strong to start 2024 compared to the final quarter of 2023.”

Purchase applications decreased by 1% from one week earlier on a seasonally adjusted basis, while refinance applications picked up by 12% in the same period. Last week, refis comprised 35.4% of all applications, up from 34.2% the previous week.

Despite swings in Treasury yields, mortgage rates have remained stable since the beginning of the year. The 30-year fixed-rate mortgage averaged 6.63% as of Feb. 1, according to Freddie Mac’s Primary Mortgage Market Survey.

The MBA survey shows the average mortgage rate for 30-year fixed-rate loans with conforming balances ($766,550 or less) increased to 6.80%, up from 6.78% the week before. Meanwhile, rates on jumbo loans (greater than $766,550) decreased to 6.88%, down from 6.94%.

The Federal Housing Administration’s (FHA) share of total applications decreased to 13.1% last week, down from 13.8% the week prior. The U.S. Department of Veterans Affairs (VA) share rose to 14.1%, up from 13.3% the week before. The U.S. Department of Agriculture (USDA) share remained unchanged at 0.4%.

The MBA survey, conducted weekly since 1990, covers more than 75% of all U.S. retail residential mortgage applications.