Applications slipped as year-end seasonality and a post-Fed rate bump reshaped demand
Mortgage demand pulled back in the latest week as slightly higher rates and typical year-end slowing weighed on new borrowing, even as refinances claimed their largest share of activity since September.
The Mortgage Bankers Association’s latest weekly survey for the week ending December 12 showed total mortgage applications down 3.8% on a seasonally adjusted basis from the prior week, with the unadjusted index off 5%.
Refinances fell 4% week over week but remained 86% higher than the same week a year earlier, while purchase applications dropped 3% on a seasonally adjusted basis and 7% unadjusted, though they held 13% above year-ago levels.
“Mortgage rates inched up last week following the FOMC meeting, as investors interpreted the comments to signal that we are near the end of this rate cutting cycle. As a result, mortgage applications declined slightly,” Mike Fratantoni, MBA’s senior vice president and chief economist, said.
The Fed’s final 2025 rate cut of 25 basis points barely moved bond yields, leaving mortgage rates stuck above 6%, says Melissa Cohn of William Raveis Mortgage. https://t.co/ReNhkb1J89
— Mortgage Professional America Magazine (@MPAMagazineUS) December 12, 2025
Fratantoni said the late-December slowdown in home buying continued to shift the mix of business toward refinances.
“Purchase application volume typically drops off quickly at the end of the year, and this shifts the mix of the business, with the refinance share reaching 59 percent last week, the highest level since September. However, refinance activity has remained mostly the same for the past month as rates continue to hold at around the same narrow range.”
Refi share rises as product mix shifts
The refinance share of mortgage activity rose to 59% of total applications, up from 58.2% the prior week and the highest since early autumn.
Adjustable-rate mortgages accounted for 7.2% of applications, with government programs providing a steady floor of demand: FHA loans comprised 19.5% of activity, VA 16.6% and USDA 0.4%.
On pricing, the average contract rate for 30-year fixed mortgages with conforming balances of $806,500 or less edged up to 6.38%, while jumbo 30-year rates eased slightly to 6.44%. FHA 30-year rates rose to 6.12%.
Fifteen-year fixed loans averaged 5.72%, and 5/1 ARMs came in at 5.63%.
Fed cuts, sticky inflation keep rates in a narrow range
The latest move followed a Federal Reserve rate cut that, as in two prior meetings, was accompanied by a modest uptick in mortgage rates rather than an immediate decline in borrowing costs.
Falling rates earlier in the quarter briefly lifted application volumes, with one week’s refinance volume “now 80 percent higher than four weeks ago, accounting for more than 60 percent of all application activity,” Fratantoni said in a prior interview.
Another MBA report showed a 58% spike in refis when rates tumbled to their lowest level since October 2024.
For originators and lenders, the latest data mirrors a familiar pattern heading into year-end: fewer purchase loans, more opportunistic refinances from rate‑sensitive borrowers, and a market still focused on what inflation and the Fed would do in early 2026.
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