Refinance volume plunges amid economic gloom
Mortgage application activity declined sharply last week as interest rates climbed to their highest level in two months, according to the latest data from the Mortgage Bankers Association (MBA).
The MBA’s Market Composite Index, which measures total mortgage loan application volume, dropped 12.7% on a seasonally adjusted basis compared to the previous week. On an unadjusted basis, application volume fell 11%.
“Overall mortgage application activity declined last week, as rates increased to their highest level in two months,” said Joel Kan, MBA’s deputy chief economist. “The 30-year fixed rate rose for the second straight week to 6.9%, an almost 30-basis-point increase over two weeks.”
Kan added that the spike in rates had a particularly strong impact on refinance activity. “These higher rates drove a 20% drop in refinance applications, especially for higher balance loans, with the average loan size falling substantially,” he said.
Still, refinance volume remained 43% higher than the same week a year ago. The dollar volume of refinance applications fell 23.4% week over week, according to Fannie Mae data. Year-over-year, refinance application dollar volume is up 38%.
The refinance share of total mortgage activity dropped to 37.3%, the lowest level since January, down from 41.3% the week before.
Purchase activity also slowed, with the seasonally adjusted purchase index falling 7% week over week. Unadjusted purchase applications declined 6% compared to the previous week but remained 6% higher than the same time in 2024.
“Economic uncertainty and rate volatility impacted prospective homebuyers as we saw a 7% decline in purchase applications,” Kan noted. “Both conventional and government purchase activity fell relative to the week before, but the overall level of purchase applications was still 6 percent higher than a year ago.”
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In terms of loan types, the FHA share of total applications rose to 16.7% from 15.8% the week prior. VA loan applications made up 13.4% of the total, down from 13.7%, while USDA loans accounted for 0.4%, slightly lower than the previous week’s 0.5%. The share of adjustable-rate mortgage (ARM) activity declined to 7.5% of total applications.
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