Applications for mortgages to purchase homes saw a decline, dropping by 2% over the past week, according to the latest data. This comes as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased slightly to 6.95% from the previous week's 6.97%. Despite this decline, the demand for refinancing surged, registering a 10% increase compared to the previous week. This rise in refinance applications marks a 33% increase compared to the same period last year and has reached its highest level since 2016.
The Mortgage Bankers Association's (MBA) seasonally adjusted index reflected this upward trend in refinancing activity, showing a significant 10% gain. However, with mortgage rates hovering near 7%, the benefits of refinancing remain limited for many homeowners. Currently, about 17% of homeowners with mortgages have interest rates at or above 6%, indicating that only a fraction can take advantage of the refinancing opportunity.
The overall demand for mortgages exhibited a 2% increase compared to the same week one year ago. However, it's important to note that these percentage increases are emerging from a notably low volume base. Additionally, Joel Kan, MBA's Vice President and Deputy Chief Economist, highlighted the fluctuations in mortgage rates.
"Mortgage rates moved slightly lower last week, which led to the pace of refinance applications reaching its strongest week since October 2024," said Joel Kan, MBA's vice president and deputy chief economist.
The average loan size for purchase applications rose to $456,100—the highest since March 2022. This increase was partially driven by a reduction in FHA purchase applications and a rise in VA loans compared to the previous week.
"The average loan size for a purchase application increased to its highest level since March 2022 at $456,100, partially driven by fewer FHA purchase applications but more VA loans compared to the previous week," Kan added.
In addition, mortgage rates experienced a slight uptick at the start of this week, as reported by Mortgage News Daily. This movement in rates could be further influenced by forthcoming critical inflation data from the monthly Consumer Price Index, potentially causing more definitive shifts in mortgage rates.
"Mortgage rates moved very slightly higher to start this week, according to a separate survey from Mortgage News Daily."