Total mortgage application volume soared an incredible 20% last week from the week earlier. Mortgage rates fell recently, reaching their lowest level since last October. That abrupt transition played a large part in one of the market’s biggest booms. Experts are warning that this increase will be temporary as mortgage rates have retroactively started to rise again.
The average refinance loan size remained unchanged at $399,600, tied for the second-largest amount ever recorded in the survey. And refi demand jumped 35% week-over-week—their biggest jump in one week. Homebuyers, too, are hungry to lock in lower rates while they’re low — before they potentially start ticking back up.
Amid this swell in demand, the mortgage landscape is still fraught with uncertainty. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased to 6.61% from 6.70%. Furthermore, the average interest rate for 5/1 adjustable-rate mortgages (ARMs) fell to 5.93% from 6.04%. While these changes may encourage more buyers and refinancers, analysts warn that the trajectory of rates is influenced heavily by upcoming economic data.
Matthew Graham, chief operating officer at Mortgage News Daily, noted the significance of the forthcoming inflation data, stating, “The safest bet would be to focus on this week’s inflation data, with Thursday’s CPI and Friday’s PPI both having a strong track record of influencing rate momentum.”
Homebuyer demand surged to impressive levels too, as purchase applications rose to the highest level since January 2024. Demand really is coming back with a vengeance! This increase is attributable to the impact of lower interest rates and the seasonal factor that typically triggers more widespread homebuying activity in the spring and summer months.
Though the increase in mortgage rates was not dramatic, it represented a major change in market sentiment. The effective rate is 40 basis points lower than this time last year. This sizable dip provides a rare opportunity for first-time homebuyers still hoping to find a place in this competitive market.
Although these are encouraging signs for prospective homebuyers and current homeowners looking to refinance, experts warn that this demand is unlikely to be sustainable. The recent spike in mortgage rates not mentioned in that report and possible inflationary pressures may put a lid on enthusiasm over the next few weeks.