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Mortgage applications climb as rates continue to decline

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Mortgage applications increased 11.2% on a seasonally adjusted basis from last week, according to data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey for the week ending March 7, 2025.

On an unadjusted basis, the index increased 12% compared to last week.

The refinance index saw a 16% uptick from the previous week and was 90% higher than the same week one year ago, largely driven by a dip in the 30-year fixed rate observed by the MBA.

The seasonally adjusted purchase index increased 7% last week while the unadjusted purchase index increased 8% compared with the previous week and was 4% higher than the same week one year ago.

“Mortgage rates declined for the sixth consecutive week, with the 30-year fixed rate dropping to 6.67%, the lowest level since October 2024. As a result, applications increased over the week and were up 31% from a year ago,” said Joel Kan, MBA’s vice president and deputy chief economist. “As we enter the spring homebuying season, the purchase index was more than 4% higher than a year ago, and activity was up across all loan categories. Government purchase applications experienced an 11% increase – helped by the FHA rate dropping to 6.34%. Additionally, average loan sizes were higher, with the purchase loan amount hitting $460,800, the highest in the survey dating back to 1990.”

The refinance share of mortgage activity increased to 45.6% of total applications from 43.8% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 7.2% of total applications.

By product, the FHA share of total applications decreased to 16.1% from 16.7% the week prior and the VA share of total applications increased to 15.9% from 14.6% during the same period. The USDA share of total applications decreased to 0.4% from 0.5% the week prior after remaining at 0.5% for several weeks.

While the average contract interest rate for 30-year fixed-rate mortgages decreased to 6.67%, every other loan type saw rates decrease.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances also saw a decrease to 6.68% from 6.83%.

The average contract interest rate for 30-year fixed-rate FHA mortgages decreased to 6.34%

percent from 6.42%, and the average contract interest rate for 15-year fixed-rate mortgages decreased to 6.04% from 6.12%.

The average contract interest rate for 5/1 ARMs decreased to 5.81% from 5.85%

Read more at Housingwire

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Weekly mortgage demand surges 20% higher, after interest rates drop to the lowest since last year

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A sharp drop in mortgage interest rates finally lit a fire under loan demand. Both current homeowners and potential homebuyers jumped back into the market, after a lackluster showing for this year so far.

Total mortgage application volume jumped 20.4% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. This was not only the first increase in three weeks, but it is an outsized weekly move.

Mortgage rates were clearly the culprit. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $806,500 or less, decreased to 6.73% from 6.88%, with points falling to 0.60 from 0.61, including the origination fee, for loans with a 20% down payment. That is the lowest level since December 2024.

“Mortgage rates declined last week on souring consumer sentiment regarding the economy and increasing uncertainty over the impact of new tariffs levied on imported goods into the U.S.,” said Joel Kan, an MBA economist, in a release. “Those factors resulted in the largest weekly decline in the 30-year fixed rate since November 2024.”

Applications to refinance a home loan, which are most sensitive to weekly moves in interest rates, jumped 37% for the week and were 83% percent higher than the same week one year ago. While the vast majority of borrowers today still have loans with rates well below what is being offered today, more recent buyers from the last two years are now able to benefit from a refinance.

Applications for a mortgage to purchase a home rose 9% for the week but were still just 2% higher than the same week one year ago.

“This is a period where we typically see purchase activity ramp up and purchase applications were up over the week and continued to run ahead of last year’s pace, more green shoots as we head into the spring homebuying season,” Kan added.

While the weekly jump in purchase volume is certainly positive, it is still historically low. Buyers are up against high home prices, limited inventory and more uncertainty about the overall economy. The new tariffs levied on China, Canada and Mexico are widely expected to raise home prices, especially for new construction.

Mortgage rates moved very slightly lower to start this week, according to a separate survey from Mortgage News Daily. Tuesday, when the tariffs went into effect, the stock and bond markets rode a roller coaster, with bond yields, which mortgage rates follow, dropping along with stocks.

“As the day progressed, stocks and bonds bounced back in the other direction and the move was big enough for most mortgage lenders to reprice back toward slightly higher rates,” wrote Matthew Graham, chief operating officer at Mortgage News Daily. 

Read more at CNBC

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What the Fed's December rate cut means for mortgage interest rates

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The Federal Reserve implemented its third consecutive rate cut of 2024 today (December 18), reducing its benchmark federal funds rate by 25 basis points. This decision lowered the Fed's benchmark rate to a range of 4.25% to 4.50%, down from its previous range of 4.50% to 4.75%. This December adjustment follows earlier cuts in September and November, when the Fed enacted reductions of 50 basis points and 25 basis points, respectively. Since September, the federal funds rate has fallen by a full percentage point, a significant shift reflecting the Fed's evolving approach to supporting the economy.

The Fed's December rate decision reflects growing confidence in the economy's trajectory and the continued moderation of inflation pressures, despite an uptick in the inflation rate over the last few months. The big benefit of Fed rate cuts is that they can help drive down the cost of borrowing, making lending products like personal loans and home equity loans more affordable — which can be a big boon for borrowers in today's higher-rate environment. But loan rate drops aren't guaranteed to occur across the board, and for homebuyers and homeowners alike, the Fed's latest rate reduction raises important questions about the direction that mortgage interest rates could be headed in. 

While any reduction in the federal funds rate typically generates optimism among borrowers, the relationship between Fed policy and mortgage rates is more complex than many realize. So what does this new Fed rate cut mean for mortgage interest rates?

What the Fed's December rate cut means for mortgage interest rates

While borrowers may be hoping that the Fed's latest move helps to lower mortgage rates, the Federal Reserve's 25 basis point rate cut is unlikely to lead to a dramatic drop. Here's why:

It's a rate reduction — but it's a modest one

The December rate cut — though a positive step — is still relatively small, especially when compared to September's more substantial 50 basis point reduction. Larger rate cuts tend to have a more immediate and noticeable impact on mortgage rates, as they create broader economic shifts that lenders respond to. For example, before September's significant 50 basis point cut, mortgage rates plunged to a two-year low. 

That's not likely to happen now, though. While a 25 basis point reduction may nudge mortgage rates downward it is unlikely to produce a major drop. This is partly because lenders factor in a wide range of economic conditions when determining their mortgage offerings. So while the latest Fed rate cut may signal a favorable trend for borrowers, its effect on mortgage rates is likely to be gradual rather than transformative — and should a mortgage rate cut occur, it likely won't amount to the same percentage drop as the Fed rate cut, either.

Lenders have likely already factored in the Fed rate cut

Financial markets and lenders often anticipate Federal Reserve decisions and adjust their pricing strategies in advance. By monitoring economic data and Fed communications, lenders typically make preemptive changes to mortgage rates before an official rate cut is announced. 

What this means is that by the time the December cut occurred, many mortgage lenders had already incorporated the expected reduction into their loan offerings. As a result of this proactive approach, mortgage rates are likely to show little to no immediate movement despite the Fed's announcement. For prospective homebuyers, this highlights the value of keeping a close eye on rate trends and acting promptly when favorable opportunities arise.

The Fed rate cut won't offset the other risk factors at play

While the Fed's rate decisions can impact where mortgage interest rates head, the reality is that mortgage rates are influenced by more than just the Fed's benchmark rate. Key economic indicators like inflation, unemployment and the 10-year Treasury yield also play pivotal roles in terms of how mortgage rates are determined by lenders. 

For example, while there was no Fed meeting in October, mortgage rates still rose due to shifts in these other variables. This complex interplay means that while a Fed rate cut can contribute to lower mortgage rates, it is not the sole determinant. So, borrowers should remain aware of the broader economic trends that can further impact mortgage rates when evaluating their financing options.

The bottom line

While the Fed's latest rate cut represents another step in the right direction for borrowers, its direct impact on mortgage rates may be limited. After all, mortgage rates are influenced by a complex web of factors, of which the federal funds rate is just one component. For those considering a home purchase or refinance, the key takeaway is to focus on what makes sense for their ideal borrowing timeline rather than trying to time the market based solely on Fed decisions. While lower rates are generally beneficial for borrowers, waiting for perfect market conditions can be counterproductive, especially in a housing market where prices and inventory levels continue to fluctuate.

As a result, the best approach in today's unusual rate and housing market environment is to maintain a comprehensive view of your financial situation while carefully monitoring market conditions. You should also be prepared to act when opportunities arise that align with your personal financial goals. As the Fed continues to adjust its monetary policy stance, the mortgage market will likely continue to evolve, creating both challenges and opportunities.

Read more on CBS News

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Mortgage Rates Fall to 6.78% Amid Postelection ‘Rate Volatility’

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Mortgage rates ticked down from 6.79% last week to 6.78% for a 30-year fixed home loan for the week ending Nov. 14, according to Freddie Mac.

“After a six-week climb, rates have leveled off, but overall affordability continues to be an issue for potential homebuyers,” said Sam Khater, Freddie Mac’s chief economist.

The downturn can be traced to the presidential election, which dominated headlines last week and sent the stock market into overdrive.

“The coming months could bring more mortgage rate volatility as reactions to the election and its implications move through the market,” says Hannah Jones, Realtor.com® senior economic research analyst.

As Americans brace themselves for what could be a wild economic ride as 2024 winds down, here’s a snapshot of the latest housing market data and what it means for homebuyers and sellers.

 
 

Mortgage rates expected to climb higher

Once the elections were in the rearview mirror, all economic eyes turned to the Federal Reserve’s Open Market Committee, which met last Thursday.

The Fed cut the Federal Funds rate (the interest rate banks charge each other for short-term loans) by 25 basis points, to 4.5% from 4.75%.

While the Fed doesn’t set mortgage rates, Fed rates and mortgage rates tend to move in the same direction, which helps explain why mortgage rates sank this week. However, “the Freddie Mac rate for a 30-year mortgage continued to remain higher than many initially expected,” explains Realtor.com economist Jiayi Xu.

This “recent upward trajectory of mortgage rates could largely discourage sellers from listing their homes,” says Jones—especially given that roughly 84% of outstanding mortgages have a rate of 6% or lower.

And mortgage rates are expected to go even higher “as a result of postelection Treasury yields,” adds Jones.

Even so, the Realtor.com economic team continues to hold out hope that the largely frozen real estate market might begin to thaw.

“Despite still-high rates, a recent read on homebuyer and seller sentiment showed relatively rosy expectations,” says Jones.

About 64% of sellers consider now a good time to sell, and just 22% of respondents expect mortgage rates to climb.

“Only time will tell whether the market will reflect this optimism,” says Jones.

Median home prices fall slightly

Mortgage rates continue to seesaw while home prices remain flat, falling just 0.2% for the week ending Nov. 9 compared with the same week last year. (Listing prices hit a median of $424,950 nationwide in October.)

This is the 24th week in a row that the median list price was less than or equal to the same week of 2023.

However, when a change in the inventory mix toward smaller homes is accounted for, the median listing price per square foot increased by 1.7% the week ending Nov. 9 compared with the same week a year prior.

“The housing market has remained largely unaffordable to many would-be buyers over the last year,” says Jones.

Despite this, buyers have a glimmer of hope, with “nearly 20% of listings offering price cuts,” according to Xu.

Housing stock continues to rise

Fresh listings are always a boon for buyers, yet they rose by only 1.7% for the week ending Nov. 9 compared with a year ago.

Overall housing stock is also up, with 26.1% more homes for sale for the week ending Nov. 9 than the previous year. This marks 53 weeks with a higher number of homes listed for sale compared with the year before.

Even so, this week’s uptick in housing stock was lower than last week’s, marking the seventh week of slowing momentum and the lowest annual change since late March.

“Slowing listing activity and stifled buyer demand has resulted in slowing inventory growth,” explains Jones.

Nevertheless, if mortgage rates decrease, it could boost buyer demand, which could eat into the recent buildup of housing stock.

Homebuyers are slow to act

Buyers might have taken a break from their house hunt last week to focus on the election—and the economic fallout—as homes spent nine more days on the market for the week ending Nov. 9 year over year. (In October, homes spent a median of 58 days on the market.)

“Generally, buyers have been holding off, waiting for more affordable housing conditions,” says Jones.

The recent bounce-back in mortgage rates that had been edging closer to 6% might be disappointing for homebuyers hoping for a year-end dip.

However, they can benefit from other buyer-friendly market trends, such as “the highest inventory since December 2019 and the slowest seasonal market in five years,” says Xu.

Read more at Realtor.com

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What To Expect from Mortgage Rates and Home Prices in 2025

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Curious about where the housing market is headed in 2025?

The good news is that experts are offering some promising forecasts, especially when it comes to two key factors that directly affect your decisions: mortgage rates and home prices.

Whether you’re thinking of buying or selling, here’s a look at what the experts are saying and how it might impact your move.

Mortgage Rates Are Forecast To Come Down

One of the biggest factors likely affecting your plans is mortgage rates, and the forecast looks positive. After rising dramatically in recent years, experts project rates will ease slightly throughout the course of 2025 (see graph below):

 
 

While that decline won’t be a straight line down, the overall trend should continue over the next year. Expect a few bumps along the way, because the trajectory of rates will depend on new economic data and inflation numbers as they’re released. But don’t get too hung up on those blips and reactions from the market as they happen. Focus on the bigger picture.

Lower mortgage rates mean improving affordability. As rates come down, your monthly mortgage payment decreases, giving you more flexibility in what you can afford if you buy a home.

This shift will likely bring more buyers and sellers back into the market, though. As Charlie Dougherty, Director and Senior Economist at Wells Fargo, explains:

“Lower financing costs will likely boost demand by pulling affordability-crunched buyers off of the sidelines.”

As that happens, both inventory and competition among buyers will ramp back up. The takeaway? You can get ahead of that competition now. Lean on your agent to make sure you understand how the shifts in rates are impacting demand in your area.

Home Price Projections Show Modest Growth

While mortgage rates are expected to come down slightly, home prices are forecast to rise—but at a much more moderate pace than the market has seen in recent years.

Experts are saying home prices will grow by an average of about 2.5% nationally in 2025 (see graph below):

 
 

This is far more manageable than the rapid price increases of previous years, which saw double-digit percentage growth in some markets.

What’s behind this ongoing increase in prices? Again, it has to do with demand. As more buyers return to the market, demand will rise – but so will supply as sellers feel less rate-locked.

More buyers in markets with inventory that’s still below the norm will put upward pressure on prices. But with more homes likely to be listed, supply will help keep price growth in check. This means that while prices will rise, they’ll do so at a healthier, more sustainable pace.

Of course, these national trends may not reflect exactly what’s happening in your local market. Some areas might see faster price growth, while others could see slower gains. As Lance Lambert, Co-Founder of ResiClub, says:

“Even if the average national home price forecast for 2025 is correct, it’s possible that some regional housing markets could see mild home price declines, while some markets could still see elevated appreciation. That has been, after all, the case this year.”

Even the few markets that may see flat or slightly lower prices in 2025 have had so much appreciation in recent years – it may not have a big impact. That’s why it’s important to work with a local real estate expert who can give you a clear picture of what’s happening where you’re looking to buy or sell.

Bottom Line

With mortgage rates expected to ease and home prices projected to rise at a more moderate pace, 2025 is shaping up to be a more promising year for both buyers and sellers.

If you have any questions about how these trends might impact your plans, connect with a local agent. That way you’ve got someone to help you navigate the market and make the most of the opportunities ahead.

Read more at KeepingCurrentMatters.com

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