The spring market's reaction to rate cuts isn't what you'd expect
The average 30-year fixed mortgage rate fell this week, but the decline failed to spark a meaningful jump in buyer activity, according to fresh data from Freddie Mac and the Mortgage Bankers Association (MBA).
Freddie Mac’s latest Primary Mortgage Market Survey (PMMS) showed the 30-year fixed-rate mortgage (FRM) averaged 6.76% as of May 1, 2025, down from 6.81% the previous week. A year ago, the 30-year FRM stood at 7.22%. The 15-year FRM averaged 5.92%, slightly down from 5.94% last week and below 6.47% from the same time last year.
“Mortgage rates again declined this week,” said Freddie Mac chief economist Sam Khater. “In recent weeks, rates for the 30-year fixed-rate mortgage have fallen even lower than the first quarter average of 6.83%.”
While falling rates typically boost housing demand, the effect has been muted this time.
MBA data showed that mortgage application activity dropped 4.2% from the prior week, with both refinance and purchase applications sliding 4%. This slowdown brings mortgage demand to its lowest point since February, weighed down by broader economic uncertainty and emerging signs of labor market weakness.
“Mortgage applications fell for the second consecutive week as uncertainty continues to impact many buyers’ decisions to enter the housing market,” MBA president and CEO Bob Broeksmit said.
However, Broeksmit noted that purchase activity is still outpacing last year’s levels, largely because growing housing inventory, particularly in lower-priced segments, is giving buyers more choice.
On the refinance side, Fannie Mae’s Refinance Application-Level Index (RALI) showed the dollar volume of refinance applications fell 3.9% week over week. Even so, refinance dollar volume is up 39.4% compared to the same week in 2024, indicating that some homeowners are still taking advantage of lower rates when possible.
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Commenting on the seasonal context, Holden Lewis, home and mortgage expert at NerdWallet, said the timing of the rate drop aligns with what is typically the busiest stretch for homebuyers.
“Mortgage rates dropped this week, potentially adding some oomph to real estate sales,” Lewis said. “It's good timing, as homebuyers typically are busiest from mid-April to mid-May. Buyers were thwarted by an increase in mortgage rates in the first half of April, and this week's decline might have provided enough relief to boost more sales.”
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