Mortgage Demand Surges as Rates Dip Amid Financial Market Volatility
An increase in mortgage application activity has been observed following a notable dip in mortgage interest rates last week. The fluctuations in the financial markets have dramatically impacted mortgage demand, resulting in a 20% increase in total mortgage application volume compared to the previous week, marking the highest levels since September 2024.
Current Mortgage Rates
According to the Mortgage Bankers Association’s seasonally adjusted index, the average interest rate for 30-year fixed-rate mortgages with conforming loan balances (defined as $806,500 or less) has decreased from 6.70% to 6.61%. The associated points rose slightly from 0.62 to 0.63, incorporating the origination fee for mortgage loans with a 20% down payment. This represents a significant drop of 40 basis points compared to the same period last year.
Refinance and Purchase Applications on the Rise
The drop in rates has prompted many homeowners with existing higher-rate mortgages to act swiftly. There has been a 35% increase in applications for refinancing compared to the previous week, with a striking 93% rise year-over-year. Although the resulting figures appear substantial, it is essential to note that overall volume remains relatively low, which may exaggerate these increases.
Additionally, mortgage applications for home purchases increased by 9% week-over-week, and were 24% higher than the same week in 2023. This surge reflects the highest demand for purchasing mortgages since January 2024.
Shifts in Borrowing Preferences
Despite an uptick in available listings, homebuyers face persistently high home prices. This dynamic has coincided with a rise in adjustable-rate mortgage (ARM) applications, increasing from 5.4% to 8.6% of total applications last week. The average contract interest rate for 5/1 ARMs shifted down to 5.93%, dipping below the psychologically important threshold of 6%.
Future Outlook
However, the increase in mortgage applications may be temporary, as interest rates have rebounded at the start of this week. A separate survey from Mortgage News Daily indicated a rise of 25 basis points in mortgage rates on Monday and Tuesday, erasing the previous week’s decline and additional losses.
“Additional tariff updates can certainly still cause volatility, but likely not on the scale seen over the past few days,” commented Matthew Graham, Chief Operating Officer at Mortgage News Daily. He advised that the upcoming inflation reports—specifically Thursday’s Consumer Price Index (CPI) and Friday’s Producer Price Index (PPI)—are critical, as they have historically influenced mortgage rate trends.
