US mortgage rates hit record low, purchase applications at 11-year high

US home loan costs hit a record low last week, spurring a surge in applications for both home purchase loans and mortgage refinancings, the Mortgage Bankers Association's (MBA) weekly survey showed on Wednesday.

The interest rate on a 30-year fixed-rate mortgage, the most popular US home loan, dropped to 3.30 percent in the week ended June 12 from 3.38 percent the week before, the MBA said.

Mortgage rates have dropped by around half a percentage point from earlier this year after the Federal Reserve cut interest rates to near zero to cushion the blow to the economy from the coronavirus pandemic.

Overall mortgage applications rose 8 percent last week on the back of the drop in lending rates, the MBA said. Applications for a mortgage to buy a home rose to an 11-year high, and refinancing applications increased 10 percent to the highest since late April.

"The housing market continues to experience the release of unrealized pent-up demand from earlier this spring, as well as a gradual improvement in consumer confidence," Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting, said in a statement.