The surge followed a drop in the 30-year fixed mortgage rate to 6.39%, the lowest level since October 2024
Mortgage applications jumped 29.7% last week, the sharpest weekly increase in over a year, according to the Mortgage Bankers Association’s (MBA) latest survey. The surge followed a drop in the 30-year fixed mortgage rate to 6.39%, the lowest level since October 2024, as borrowers responded to shifting market dynamics and a 25-basis-point cut by the Federal Reserve.
The MBA’s Market Composite Index, which measures mortgage applications, jumped 29.7% after adjusting for the season and 43% without adjustments compared to the previous week. Most of the growth came from refinancing, which shot up 58% from the week before and was 70% higher than a year ago. Purchase applications also rose, increasing 3% with seasonal adjustment and 12% unadjusted, up 20% from last year.
“The continued, swift decline in mortgage rates is fueling increased borrower demand. Mortgage applications surged nearly 30 percent last week, led by a 58 percent jump in refinances. Prospective homebuyers also acted on lower rates, with activity up solidly last week and compared to a year ago. The Federal Reserve’s decision to cut short-term rates yesterday should put more downward pressure on mortgage rates, which is good news for borrowers in the coming weeks and months,” Bob Broeksmit, MBA president and CEO, said.
Refinance and ARM activity hit new highs
The refinance share of mortgage activity soared to 59.8% of total applications, up from 48.8% the previous week. Adjustable-rate mortgages (ARMs) also saw renewed interest, with their share rising to 12.9%, the highest since 2008.
“Even as 30-year fixed rates reached their lowest level in almost a year, more borrowers, and particularly more refinance borrowers, opted for adjustable-rate loans, with the ARM share reaching its highest level since 2008,” Mike Fratantoni, MBA’s SVP and chief economist, said. “Notably, ARMs typically have initial fixed terms of five, seven, or ten years, so those loans do not pose the risk of early payment shock that pre-2008 ARMs did. Borrowers who do opt for an ARM are seeing rates about 75 basis points lower than for 30-year fixed rate loans.”
Meanwhile, Kirk Todd, branch manager and senior loan originator at Choice Mortgage Group, has been advising clients that now is a good time to buy. An analysis by online lending marketplace LendingTree showed that millennials aged 28 to 43 made up nearly half (49.7%) of mortgage purchase inquiries in the US's 50 largest metros in 2024. In tech centers, millennials drove 62.6% of inquiries in San Jose, 57.1% in Seattle, and 56.9% in San Francisco. He said if rates or prices drop further, more buyers will jump in, making competition tougher and likely pushing prices back up.
“Theoretically, property values will continue to go up,” Todd told Mortgage Professional America. “If you can get in now and afford it now, then you're set up for refinance to a lower rate. Hopefully, in that period of time, it will have built up a bunch of equity. Even if appreciation goes back to 2.5% to 3.5%, which is a normal market, that's a lot of money when you compound it.”
Product mix shifts as borrowers seek flexibility
The data showed a mixed picture for government-backed loans. The Federal Housing Administration (FHA) share of total applications decreased to 16.3%, while the VA share edged up to 15.8%. The USDA share slipped to 0.5%. Meanwhile, the average contract interest rate for 30-year fixed-rate mortgages with conforming balances fell to 6.39%, and FHA-backed loans dropped to 6.14%. Jumbo loans, however, saw a slight uptick to 6.48%.
The average rate for 15-year fixed mortgages decreased to 5.63%, and 5/1 ARMs dropped to 5.65%. The effective rates for most products fell, underscoring the impact of market expectations for monetary easing.
MBA’s weekly survey, conducted since 1990, compiles data from mortgage bankers, commercial banks, and credit unions, covering retail and consumer direct mortgage applications nationwide.
