While mortgage rates dropped to their lowest level since September, applications for home purchases were down nearly 10% from two weeks prior. Despite the mixed trends, mortgage watchers expect rates to remain at current levels with periods of increased refinances.
According to the latest Mortgage Bankers Association (MBA) report, the Market Composite Index—the measure of mortgage loan activity volume—decreased 9.7% from two weeks earlier on a seasonally adjusted basis for the week ending Jan. 2, following a 5.0% decrease for the week ending Dec. 19. On an unadjusted basis, the Index decreased 28% compared with two weeks ago.
“Mortgage rates started the New Year with a decline to 6.25 percent, the lowest level since September 2024,” said Joel Kan, MBA’s vice president and deputy chief economist. “Refinance applications were up 7 percent for the week but were at a slower pace than in the weeks leading up to the holidays. FHA refinance applications saw a 19 percent increase, although that was a partial rebound from a drop the week before. MBA continues to expect mortgage rates to stay around current levels, with spells of refinance opportunities in the weeks when rates move lower.”
Added Kan, “Purchase applications were 10 percent higher than the same week a year ago but were down over the week following decreases in conventional and FHA applications. The average loan size was $408,700, the smallest in a year, driven by lower average loan sizes across both conventional and government loan types.”
According to the MBA, the holiday adjusted Refinance Index decreased 14% from two weeks ago and was 133% higher than the same week one year ago. The unadjusted Refinance Index decreased 31% from two weeks ago and was 108 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 6% from two weeks earlier. The unadjusted Purchase Index decreased 23% compared with two weeks ago and was 10% higher than the same week one year ago.
The refinance share of mortgage activity increased to 56.6% of total applications from 53.8% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.3% of total applications.
Government-backed loans were all up this week, with the FHA share of total applications increasing to 20.0% from 18.4% the week prior. The VA share of total applications increased to 17.3% from 16.3% the week prior and the USDA share of total applications increased to 0.4% from 0.3% the week prior.
For additional data from this week’s report, click here.
