Mortgage Applications Reach Highest Level in Three Years as Rates Decline
A notable decline in mortgage interest rates has prompted a surge in homebuyer activity and refinancing, according to the latest data from the Mortgage Bankers Association (MBA).
Last week, total mortgage application volume increased by 9.2% compared to the previous week, adjusted for the Labor Day holiday. This marks the strongest weekly demand since 2022.
Interest Rates Fall to Lowest Level Since October 2024
The average contract interest rate for 30-year fixed-rate mortgages on conforming loans (up to $806,500) fell to 6.49% from 6.64%, with points decreasing slightly to 0.56 from 0.59. This improvement in rates is attributed to lower Treasury yields amid signs of a weakening labor market.
Joel Kan, an economist at the MBA, noted, “Mortgage rates declined for the second consecutive week as Treasury yields moved lower on data indicating that the labor market is weakening. The downward rate movement spurred the strongest week of borrower demand since 2022, with both purchase and refinance applications moving higher.”
Refinancing Activity Surges
Refinance applications jumped 12% week-over-week and are 34% higher compared to the same week last year. The refinance share of total mortgage activity rose to 48.8% from 46.9% the previous week. Despite being 20 basis points higher than a year ago, current rates are significantly lower than earlier this year and last year’s spring peak, offering potential monthly savings for recent buyers.
Loan sizes for refinancing also grew, reflecting the advantage of larger loans in reducing monthly payments.
Home Purchase Applications Increase
Applications for mortgages to purchase homes rose 7% last week and are 23% above the same period in 2024, reaching the highest level since July. The increased uptake includes a rise in adjustable-rate mortgage (ARM) applications, which benefit from lower rates compared to fixed-rate loans, thus attracting more homebuyers.
Looking ahead, mortgage rates experienced a slight uptick at the start of the current week. Market participants are awaiting key inflation reports scheduled for Wednesday and Thursday, which are expected to influence rate movements.
FinOracleAI — Market View
The sharp decline in mortgage rates has clearly stimulated demand, boosting both refinancing and home purchase applications to multi-year highs. This momentum suggests a positive near-term outlook for mortgage lenders and the broader housing market. However, upcoming inflation data could introduce volatility, potentially affecting interest rate trajectories and borrower activity.
Impact: positive
