A three‑week high in rates quickly cooled a fragile refinancing rebound
Mortgage applications in the United States fell sharply last week as a modest rise in rates halted a January rebound in refinancing and reminded lenders how fragile demand remains at the start of 2026.
The Mortgage Bankers Association (MBA) reported that its Market Composite Index, a measure of total mortgage application volume, decreased 8.5% on a seasonally adjusted basis for the week ending Jan. 23.
Refinance activity drove the decline, with the Refinance Index down 16% week over week, though it still stood 156% above the same week a year earlier, when rates were nearly 80 basis points higher.
“Mortgage rates increased for the first time in a month, and as expected, refinance applications fell by 16 percent. The 30‑year fixed rate was the highest in three weeks at 6.24 percent,” said Joel Kan, MBA vice president and deputy chief economist.
“With rates holding in the 6 percent range, the refinance market was likely to remain sensitive to week‑to‑week rate movements.”
Refinance spike proves short lived
Just a week earlier, MBA data showed refinance applications surging 20% as the average 30‑year contract rate slipped to 6.16%, the lowest since September 2024, and pushed refis to more than 60% of total volume.
That pattern – sudden bursts of activity followed by equally quick pullbacks – has defined the refi market since rates retreated from 2025 highs near 7%.
“FHA refinance activity bucked the overall trend and increased, as FHA rates remained almost 20 basis points lower than conforming rates,” Kan said, highlighting how government‑backed segments continued to carve out pockets of opportunity even as conventional volume slipped.
Purchase pipeline held up, but at higher price points
On the purchase side, the seasonally adjusted Purchase Index edged down only 0.4% from the prior week and was 18% higher than a year earlier, even as borrowers confronted stubbornly high prices and a supply mix tilted to the upper end of the market.
“The average loan size stayed at its highest level since September 2025,” Kan said, underscoring how much of the current demand still came from better‑heeled buyers.
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