As months of rising mortgage rates discourage Americans from buying homes or refinancing existing loans, mortgage applications have gone into an extended downturn, a new report from a lenders trade group shows.

But analysts see signs that rates are leveling off and could help borrowing rebound.

Plus, they suggest the recent mortgage rate increases aren’t as dire as they seem.

Mortgage demand drops again

Mortgage applications were down 5.1% last week, driven by lower refinance and homebuyer applications, the Mortgage Bankers Association reported on Wednesday.

Refi applications, down for the fifth straight week, were off 5% from the previous week and 20% from the same time last year, the MBA says.

The share of refi applications shrank to 60.3% of all mortgage activity, from 60.6% a week earlier.

The number of applications to purchase homes also fell by 5% last week. But the volume was 51% higher than a year ago, when the market had essentially shut down due to the start of the pandemic.

The hunger for houses is strong now, but soaring home prices and a desperately low supply of homes for sale are working against buyers.

"The rapidly recovering economy and improving job market is generating sizable homebuying demand, but activity in recent weeks is constrained by quicker home-price growth and extremely low inventory," says Joel Kan, the association’s lead forecaster.

Mortgage rates need a reality check

Rising interest rates haven't helped. The MBA says its survey finds the 30-year fixed-rate mortgage averaged 3.36% last week, up from 3.30% the previous week.

But even though 2021 has been a rough year for mortgage rates — which have leapt from their record low in early January — rates are still low by historical standards. And, the spikes haven’t been as severe as in previous periods of escalating rates.

Rate increases in 2013 were much worse than what the country is experiencing now, writes Matthew Graham of Mortgage News Daily. And even as recently as 2016, "one could argue some of that movement was worse than what we’ve seen in 2021."

If you’ve been wanting to refinance an existing mortgage to cut your interest rate and monthly payment, this may be a good window to make that move.

“The evidence for a supportive shift in the rate environment is beginning to mount,” Graham says. “Simply drifting sideways at current levels would be a big victory."

Mortgage data and technology provider Black Knight has estimated that 11.1 million homeowners still could save an average $277 a month by refinancing their loans.

Home price increases may begin to slow

Would-be homebuyers could soon see some relief from skyrocketing home values.

National home prices were up 10.4% in February compared to a year ago, representing the highest year-over-year gain since April 2006, says the real estate data firm CoreLogic.

But affordability constraints may have a slowing effect on home price growth, especially as mortgage rates increase, Molly Boesel, an economist with CoreLogic, said in a report this week.

Whether you want to buy your very first home, trade up to a bigger and more expensive house, or refinance your current home, be sure to check mortgage rates from multiple lenders to find the best deal available in your area.

It may take a little time, but it should be worth it. Studies have found that borrowers who compare at least five rate offers save thousands of dollars over time.

Another potential source of savings is homeowners insurance. When you buy or renew a policy, compare rate quotes from several insurers to find the lowest price on the coverage you need.