Mortgage rates hit highest level since July, crushing application demand

Mortgage rates last week moved higher for the fourth week in a row. That caused already very weak mortgage demand to drop even further. Total mortgage application volume fell 3.7% compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. An additional adjustment was made for the New Year's holiday.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 6.99% from 6.97%, with points decreasing to 0.68 from 0.72 (including the origination fee) for loans with a 20% down payment. That is the highest rate since July 2024.

Applications to refinance a home loan rose 2% from the previous week but were 6% lower than the same week one year ago. Rates are now 18 basis points higher than they were one year ago. As for the weekly gain, volume in refinances is so low right now, that percentages are skewing larger than they normally would.

Applications for a mortgage to purchase a home fell 7% for the week and were 15% lower than the same week one year ago. There is considerably more supply of homes for sale now than there was last January, but higher rates and higher home prices are clearly keeping buyers on the sidelines.

"Purchase applications declined for both conventional and government loans and dropped to the slowest weekly pace since February 2024," said Joel Kan, vice president and deputy chief economist at the MBA. "Refinance applications increased despite higher rates, but the increase was compared to recent low levels and was entirely driven by an increase in VA refinances, which continue to show weekly swings."

Mortgage rates moved higher to start this week, according to a separate survey from Mortgage