Mortgage applications fell 3.7% for the week ending January 3, 2025, according to the Mortgage Bankers Association (MBA)'s Weekly Mortgage Application Survey. The decline highlights the ongoing impact of rising interest rates, with the 30-year fixed mortgage rate ending 2024 around 6.99%, the highest level since July.
Joel Kan, MBA’s Vice President and Deputy Chief Economist, commented on the trends, stating, “Applications decreased last week as rising mortgage rates continued to discourage buyers from entering the market and put a damper on purchase activity." The reported data has been adjusted to account for the New Year’s holiday.
Seasonally adjusted purchase applications dropped by 7%, marking their lowest level since February 2024. On an unadjusted basis, purchase applications surged by 43% from the previous week, primarily due to seasonal factors, though activity remained 15% lower compared to the same week last year.
Refinance applications saw a modest increase of 2% from the prior week, but were still 6% lower than they were a year ago.
Kan further explained, “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 applications rose to 40.8% of total mortgage activity, up from 39.4% the previous week. Meanwhile, the share of adjustable-rate mortgages (ARMs) decreased slightly to 4.7%.
Government-backed loans also saw minor increases: FHA loans rose to 16.9% of total applications from 16.6%, VA loans increased to 16.2% from 15.7%, and USDA loans edged up to 0.6% from 0.4%.
Interest rates exhibited mixed movement across different loan types. The average rate for 30-year fixed conforming loans increased slightly to 6.99% from 6.97%, while jumbo loans decreased from 7.13% to 6.99%. FHA-backed loans experienced a rate decline to 6.65% from 6.69%. In contrast, the 15-year fixed-rate mortgage rose to 6.46% from 6.43%, and the 5/1 ARM inched up to 5.98% from 5.97%.
As interest rates and housing prices remain elevated, both homebuyers and those looking to refinance face increasing challenges. The latest data underscores the ongoing strain in the housing market, with higher costs reducing affordability and dampening demand.
