Borrowers chased small rate breaks as refis outpaced purchases
Mortgage demand ticked higher in early December as borrowers seized on small rate declines in government programs, even while conventional borrowing costs stayed roughly flat and purchase activity slipped.
According to the Mortgage Bankers Association (MBA), overall applications increased 4.8% in the week ending December 5 on a seasonally adjusted basis, with refinance volume up 14% and 88% higher than the same week a year earlier.
Purchase applications fell 2% week over week but were 19% above 2024 levels, helped by a 32% unadjusted jump from the Thanksgiving-shortened prior week.
“Compared to the prior week’s data, which included an adjustment for the Thanksgiving holiday, mortgage application activity increased last week, driven by an uptick in refinance applications,” said Joel Kan, MBA vice president and deputy chief economist.
“Conventional refinance applications were up almost 8 percent and government refinances were up 24 percent as the FHA rate dipped to its lowest level since September 2024.”
Kan said the shift toward government products reflected borrowers’ search for affordability.
“Conventional purchase applications were down for the week, but there was a 5 percent increase in FHA purchase applications as prospective homebuyers continue to seek lower downpayment loans,” he said.
“Overall purchase applications continued to run ahead of 2024’s pace as broader housing inventory and affordability conditions improve gradually.”
The average contract rate for 30-year conforming loans rose slightly to 6.33%, while jumbo rates climbed to 6.46%.
By contrast, 30-year FHA rates fell to 6.08%, with the effective rate also edging lower. That gap helped push the FHA share of applications to 20.2%, up from 18.3%, while VA loans rose to 16.4% of activity.
For lenders and originators, the latest numbers underscores a market where incremental rate improvements, particularly in FHA, still unlocks pockets of demand, but where sustained growth continues to depend on deeper relief in prices and borrowing costs.
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