Mortgage demand stalls after mini refinance boom

After a massive 58% weekly surge in refinance demand the week before, mortgage demand stalled again last week, even though interest rates fell further.

Total application volume rose 0.6% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $806,500 or less, decreased to 6.34% from 6.39%, with points increasing to 0.57 from 0.54, including the origination fee, for loans with a 20% down payment. That is the lowest level since September 2024. That, however, is a weekly average, and last week was particularly volatile. Early in the week, before the Federal Reserve cut its rate, mortgage rates, which follow loosely the yield on the 10-year Treasury, fell to the lowest level in three years. In the days after the Fed cut, however, rates rose about a quarter of a percentage point.

Refinance demand, which had spiked dramatically higher the week before, climbed just 1% for the week but was 42% higher than the same week one year ago.

“Interest rates generally have moved up following the FOMC meeting last week but remain in a range that should continue to lead to increased refinance activity. Refinance volume increased further last week and is now 80 percent higher than four weeks ago, accounting for more than 60 percent of all application activity,” said Mike Fratantoni, senior vice president and chief economist at the MBA, in a release. “The refinance boost last week was from government applications, with VA refinance volume up almost 15 percent.”

Mortgage applications to purchase a home were essentially flat, up just 0.3% for the week and up 18% from the same week one year ago.

“While homebuyer demand typically tends to decrease during the fall, purchase application activity remains relatively strong right now,” Fratantoni added.

After a huge surge in demand for adjustable-rate mortgages, demand for those riskier loans fell back last week. Borrowers had been looking for any type of savings on the monthly payment, and ARM rates are much lower than fixed-rate loans.

Mortgage rates barely budged to start this week, according to a separate survey from Mortgage News Daily, as there were no major economic reports to influence the bond market. There were some speeches from Federal Reserve governors as well as Chair Jerome Powell, but none diverged from previous policy statements.

“Fed speeches can certainly have an impact, but it depends on the specifics. [Tuesday’s] most important comments came from Fed Chair Powell, but they didn’t represent any major departure from his press conference following last week’s Fed announcement,” wrote Matthew Graham, chief operating officer at Mortgage News Daily. “Still, some traders were relieved that he didn’t use the opportunity to reiterate several of last week’s topics that pushed rates higher.”