Mortgage rates made a subtle decline at the start of this week, setting the stage for a notable increase in mortgage demand. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances dipped to 6.73% from 6.88%. This reduction marks the lowest interest rate level since December 2024, sparking renewed interest among homebuyers and refinancers. As a result, total mortgage application volume soared by 20.4% last week, breaking a three-week streak of inactivity.
The decrease in points for loans, requiring a 20% down payment, fell marginally to 0.60 from 0.61, including the origination fee, adding to the appeal for prospective borrowers. Applications for purchasing homes rose by 9% over the week, though they still only registered a modest 2% increase compared to the same period last year. Despite this uptick, purchase volume remains historically low.
Refinance applications experienced a significant boost, leaping 37% for the week and standing 83% higher than the same week one year ago. This surge is partly due to more recent buyers from the past two years who are now positioned to benefit from refinancing at the current rates. However, the majority of existing borrowers continue to hold loans with rates below those presently offered.
Joel Kan, an economist with the Mortgage Bankers Association (MBA), noted the impact of seasonal buying patterns on this week's activity.
"This is a period where we typically see purchase activity ramp up and purchase applications were up over the week and continued to run ahead of last year's pace, more green shoots as we head into the spring homebuying season," – Joel Kan, an MBA economist.
However, external factors could soon influence market dynamics. New tariffs imposed on China, Canada, and Mexico are anticipated to elevate home prices, particularly affecting new constructions. These economic shifts could alter the landscape for both buyers and lenders in the near future.