The demand for mortgages from homebuyers fell dramatically last week. According to the Mortgage Bankers Association (MBA), total mortgage application volume decreased last week. The seasonally adjusted index was down 1.2%. This represents a significant reversal after four weeks of uninterrupted increases in homebuying activity.
In the latest week, applications for mortgages to purchase homes fell 3% from the prior week. It’s worth noting that purchase applications were 17% above the level of the same week last year. This indicates that while recent demand may have waned, overall interest in home purchases remains robust relative to the previous year.
Now mortgage rates fell dramatically over the past week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased from 6.69% to 6.64%. The average for these loans decreased to 0.59 from 0.60. As part of this change, it incorporates the origination fee into the loans that have a 20% down payment as standard. While mortgage rates have recently come down, they’re still 21 basis points higher than this time last year. It’s important to keep this distinction in mind as we look at today’s market.
As the week progressed, mortgage rates continued their upward trend. This demand was a direct result of extreme market volatility, particularly a European bond market sell-off. This could potentially impact future application trends.
Applications to refinance a mortgage rose a slight 1% from the previous week. This increase was largely due to an increase in FHA and VA refinance applications. These refinance applications were 20% higher than they were for the same week last year. Conventional refinances declined during this period.
“Refinance applications saw a small increase from the previous week, driven by FHA and VA refinance applications, but conventional refinances declined. The FHA rate is averaging about 30 basis points lower than the conventional rate in 2025, which has made those loans relatively more appealing to eligible borrowers,” – Joel Kan, deputy chief economist at the MBA.
This withdrawal of homebuying activity has fueled decreases in applications for all loan types. And on top of that, mortgage demand has retreated as of late. Yet, the average contract interest rate for 30-year fixed-rate mortgages remains near its lowest point since April.