Mortgage applications barely budged from last week as mortgage rates remained near — and are expected to remain near — the “psychological level” of 7%.
“Incoming economic data are likely to keep the Federal Reserve on hold for now,” said Mike Fratantoni, senior vice president and chief economist of the Mortgage Bankers Association (MBA), “while uncertainties about economic policy are likely to keep longer-term rates, including mortgage rates, steady at these levels.”
A slight rise in conventional mortgage applications pushed the MBA’s Market Composite Index (MCI) up 0.1% for the week ending January 17, 2025, on a seasonally adjusted basis, bringing total purchase application volumes up nearly 2% on an annual basis.
Amidst renewed inflation fears, mid-January inflation data showed a surprise deceleration in core inflation, excluding volatile food and energy prices, though strong December labor data suggests the next round of Federal Reserve interest rate cuts are farther down the road than the mortgage market would like.
Rising mortgage rates since roughly the second half of December have contributed to suppressed application volumes, and thus, a slowdown in mortgage activity to start the new year. The next central bank decision on interest rate easing will follow the Federal Open Market Committee Meeting (FOMC) on January 28-29.
On an unadjusted basis, the MCI increased 3% compared with the previous week. The Refinance Index decreased 3% from the previous week. The refinance share of mortgage activity decreased to 40.4% of total applications from 42.7% the previous week, while the adjustable-rate mortgage (ARM) share of activity increased to 5.5% of total applications.
“Mortgage rates remained near 7 percent, a key psychological level, which likely continues to slow the pace of activity for both refinances and purchases,” Fratantoni added.
Enduring affordability pressures and high home prices have not helped, either. FHA application volumes fell 0.4% from the previous week, VA volumes fell 1.1%, and USDA volumes declined 0.1%.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 7.02% from 7.09%, with points decreasing to 0.62 from 0.65 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
