Mortgage demand has significantly declined as the housing market enters its typical slow season. For the two weeks ending on December 27, 2024, total mortgage application volume dropped by 21.9% compared to the previous period. This downturn coincides with a sharp rise in mortgage interest rates, which have surpassed 7% for 30-year fixed loans, marking a challenging end to the year for prospective homeowners and those looking to refinance.
The refinance share of mortgage activity fell to 39.4% of total applications, down from 44.3% the week prior. This decline reflects a broader trend in refinancing, which is particularly sensitive to fluctuations in interest rates. Applications for refinancing a home loan plummeted by 36%, while applications for purchasing homes also saw a significant reduction, dropping by 13% during the same timeframe.
Current mortgage rates are showing a concerning upward trend. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $766,550 or less increased to 6.97%, up from 6.89%. Points rose as well, climbing to 0.72 from 0.67 for loans with a 20% down payment. These conditions have contributed to a substantial slowdown in mortgage activity, even as the overall number of homes on the market is greater than last year.
December typically marks the slowest month for home sales, and this year has proven no different. Many homes have remained unsold for months, primarily due to elevated prices coupled with rising interest rates. The recent surge in mortgage interest rates at the end of December has compounded these issues, leading to an environment of considerable weakness in the mortgage market.
Mike Fratantoni, chief economist at the Mortgage Bankers Association (MBA), noted, “Mortgage rates moved higher through the last full week of 2024, reaching almost 7% for 30-year fixed-rate loans.” This sentiment underscores the challenges facing buyers and refinancers as they navigate an unpredictable market.
Matthew Graham, chief operating officer at Mortgage News Daily, stated, “There's no way to know where the bond market will open up on Thursday,” highlighting the uncertainty that continues to loom over mortgage rates and availability.
The annual comparison further illustrates the struggles within the sector, showing mortgage rates have risen by 21 basis points compared to last year. As many buyers retreat from the market amid these rising costs and economic uncertainty, the outlook for early 2025 remains unclear.