On June 4, 2025, Victor Becerra walks with a federal agent surveying his burned property in Altadena, California. His property borders a home recently acquired through D.R.A.F.T. on Wapello Street. This week, the mortgage market environment changed as interest rates had a noticeable upward movement, which put a much stronger downward pressure on refinancing and purchase applications, respectively. As economic worries grow, the housing market is starting to show serious signs of cooling down.
The central tendency indicator — the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances — ticked up, to 6.82%, from 6.77%. The economic significance of these loans continued to rise, with a consistent loan to value of 0.62 (this figure incorporates the origination fee). Rates are climbing at the same time that the market is seeing its biggest increase in active inventory since the first of the year. Buyer demand has begun to curb, leading to more moderate home appreciation.
Homebuyers—whether first-time or not—are feeling the pinch as applications for refinancing a home-loan dropped by 7% this week. Even with this decline, refinancing applications are 25% higher than the same week last year. Joel Kan, a representative from the Mortgage Bankers Association, noted that “refinance applications dipped because of higher rates, with refinance applications falling, led by VA refinances partially reversing their previous week’s gain, dropping 22 percent.”
At the same time, applications to buy a home saw one of its largest declines ever at 12% this week. Purchase applications remain 13% higher than at the same time last year, indicating a year-over-year resilience in home buying despite current challenges.
This mortgage rate increase trend has been partially blamed on rising Treasury yields fueled by a re-test of economic worries. Joel Kan further commented, “Treasury yields finished higher last week on average despite an intra-week drop, driven partly by renewed concerns of the impact of tariffs on the economy. As a result, mortgage rates rose after two weeks of declines, which contributed to slower application activity.”
In an unusual twist, jumbo mortgage rates made the opposite move — staying lower than their conventional counterparts for the third week in a row. This movement indicates that some depositories are already preparing themselves for long-term success as balance sheet lending once again grows.
As the real estate market is rapidly changing, Becerra’s comments are a window into larger trends that are hurting current homeowners and future homebuyers. With rising interest rates and shifting economic conditions, the mortgage landscape is poised for further fluctuations as industry stakeholders navigate these challenges.