As mortgage rates continue to climb past the 7% mark, applications continued to take a step back following the New Year’s Day holiday. Demand decreased by 3.7% from the week prior, the Mortgage Bankers Association (MBA) reported in its weekly mortgage applications survey for the week ending Jan. 3.
While mortgage application volume decreased on a seasonally adjusted basis, the MBA’s index jump 47% from the previous week on an unadjusted basis. The trade group reported that its refinance index increased 2% from the prior week and was 6% lower than the same week one year ago.
The seasonally adjusted purchase loan index was down 7% from one week earlier. On an unadjusted basis, the purchase index increased 43% on a weekly basis and was 15% lower year over year.
“Applications decreased last week as rising mortgage rates continued to discourage buyers from entering the market and put a damper on purchase activity. The 30-year fixed rate increased for the fourth consecutive week, reaching 6.99% — the highest rate since July 2024,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement.
“Purchase applications declined for both conventional and government loans and dropped to the slowest weekly pace since February 2024. Refinance applications increased despite higher rates, but the increase was compared to recent low levels and was driven entirely by an increase in VA refinances, which continue to show weekly swings.”
The share of refinance activity increased slightly to 40.8% of total applications, up from 39.4% the previous week. Adjustable-rate mortgages (ARMs) experienced a slowdown, with activity decreasing to 4.7% of total applications.
Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA) and U.S. Department of Agriculture (USDA) loans each saw slight increases in their application shares. The FHA share of total applications increased 30 basis points to 16.9% while the VA share increased 50 bps to 16.2%. The USDA share of applications grew by 20 bps to 0.6%.
Rates for FHA-backed 30-year fixed-rate mortgages dropped from 6.69% to 6.65% during the week, while 15-year fixed loans increased slightly from 6.43% to 6.46%.
HousingWire Lead Analyst Logan Mohtashami anticipates a jumpstart in spring housing demand, attributed to a rise in pending sales data. Mohtashami’s analysis also suggests taking this data with a grain of salt. “I don’t usually put any weight on application data the last 2 weeks of the year and the first week of the new year,” he said. “However, with that said mortgage rates above 6.75% did create negative data in purchase apps last year.”
