Homebuyers and homeowners pounce as 30-year mortgage rate plunges in months
After months of elevated mortgage rates keeping borrowers on the sidelines, a sharp rate drop last week sparked a surge in mortgage applications, particularly among homeowners looking to refinance.
According to the Mortgage Bankers Association (MBA), total mortgage application volume jumped 20.4% for the week ending February 28, 2025, compared to the previous week. The spike followed a decline in interest rates, with the average 30-year fixed rate falling to 6.73% from 6.88%, its 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 US,” said MBA deputy chief economist Joel Kan. “Those factors resulted in the largest weekly decline in the 30-year fixed rate since November 2024. At 6.73%, the rate is now at its lowest level since December 2024.”
“Bond yields have dropped enough for mortgage rates to come down,” added Melissa Cohn, regional vice president at William Raveis Mortgage. “It’s also the beginning of the spring selling season, and it’s the middle of the Southern selling season. In some ways, you hope that banks will start to get aggressive because the year didn’t start off with a big bang.”
Homeowners looking to cut their mortgage costs rushed to refinance, with refinance applications climbing 37% from the previous week and a staggering 83% from a year ago. This marks the fastest pace of refinancing activity since October 2024.
The decline in rates wasn’t limited to conventional loans. The average FHA loan rate slipped to 6.42%, helping fuel a 42% jump in government-backed refinance applications. The biggest movement came from VA loans, which saw a 75% increase, a sharp swing in a segment that has been volatile in recent months.
“Refinance activity was at its fastest pace since October 2024, as conventional refinance applications rose 34% and government refinance applications increased by 42% over the week,” said Kan. “The move in government refinances was driven by a 75% increase in VA loans, which have been prone to large changes in recent months.”
With the rush to refinance, the refinance share of total mortgage activity rose to 43.8%, up from 38.9% the previous week.
Read next: How can brokers gear up for an impending refinance surge?
Purchase applications also saw an uptick, rising 9% from the previous week on a seasonally adjusted basis. Unadjusted, the increase was 12% week-over-week and 2% higher than the same period in 2024.
Kan noted that this is typically the time of year when purchase activity ramps up, and the latest data suggests some early momentum heading into the spring homebuying season.
“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," he said.
However, home affordability continues to be a major hurdle for buyers. The MBA’s Purchase Applications Payment Index showed that the national median payment for purchase applicants increased to $2,205 in January, up from $2,127 in December, as home prices and rate volatility put pressure on prospective buyers.
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