Purchase applications rise to strongest pace for more than two years, even as rates hit one-month highs
Mortgage applications ticked upward last week despite a sharp increase in borrowing costs, with government-backed purchase loans posting their strongest performance since early 2023.
This marked the end of a four-week low in mortgage activity, after mortgage applications fell for the week ending November 14.
The Mortgage Bankers Association's Market Composite Index rose 0.2% for the week ending November 21, driven primarily by purchase activity that offset continued weakness in refinancing.
The 30-year fixed-rate mortgage averaged 6.40%, marking its highest point since early October and marking the fourth consecutive week of rate increases that have cumulatively climbed 10 basis points.
"Mortgage rates crept higher last week, with the 30-year fixed rate up to 6.4%, its highest level since early October," said Joel Kan, MBA vice president and deputy chief economist.
"Despite these slightly higher rates, purchase applications increased over the week and remained at a stronger pace than a year ago, with increases across conventional and government purchase applications."
The government purchase index, which captures FHA, VA, and USDA loans, surged 9% week-over-week, signaling a notable shift in borrower behavior.
VA applications increased to 15.4% of total volume from 15.2% the prior week, while USDA loans expanded to 0.4% of activity.
"Despite slowing home-price growth and lower mortgage rates, affordability remains a challenge in many markets and government loan programs remain appealing to qualified buyers looking to purchase a home," Kan said.
The average purchase loan size fell to its lowest level in two months, underscoring the challenge borrowers face when financing homes at elevated rates.
Refinancing activity, meanwhile, contracted sharply. Refi applications declined nearly 6% to their slowest pace since September, with the refi share of total applications dropping to 53.4% from 55.4% the prior week.
Though refi volume remains 117% higher year-over-year, the gains have moderated significantly as borrowers who capitalized on earlier rate declines have already refinanced.
Adjustable-rate mortgages gained modest traction, increasing to 7.9% of total applications as some borrowers sought initial rate relief, though fixed-rate products continued to dominate origination activity.
The data underscores a market in flux, where stronger purchase demand cannot fully offset refinancing headwinds.
For lenders, the divergence signals the need to focus operational resources on purchase originations, particularly in government programs where buyer demand remains resilient despite cost constraints.
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