Is homebuying activity about to ramp up?
US mortgage applications saw a 9.2% increase last week, as falling rates amid a softening labor market drove the strongest borrower demand since 2022, according to the latest data from the Mortgage Bankers Association (MBA).
Mortgage rates continued their downward trend for the second consecutive week, driven by lower Treasury yields and indications of a softening labor market. The 30-year fixed rate dropped to 6.49%, the lowest since October 2024 after a 20-basis-point decline over two weeks. This rate movement spurred the strongest borrower demand since 2022, with both purchase and refinance applications increasing.
Joel Kan, MBA’s vice president and deputy chief economist, added, “Purchase applications increased to the highest level since July and continued to run more than 20 percent ahead of last year’s pace. There was also a pickup in ARM applications, both in terms of level and share, as ARM rates were considerably lower than fixed rate loans, which typically benefits homebuyers.”
Despite lower rates, Americans still struggle with housing affordability. A recent Realtor.com report found that as of August, only 28% of homes on the market were affordable for the average US household, down from from 55.7% in 2019. The maximum affordable home price for a median-income household has fallen to $298,000, a decrease of nearly $30,000 since 2019, when it stood at $325,000.
Meanwhile, refinance activity led the gains, with the Refinance Index up 12% from the previous week and 34% higher than the same period last year. “The holiday-adjusted refinance index had its strongest week in a year and the average loan size for refinances also increased significantly, since borrowers with large loans are more sensitive to bigger rate moves. Refinance applications accounted for almost 49 percent of all applications last week,” Kan explained.
The share of adjustable-rate mortgage (ARM) applications also rose, reaching 9.2% of total activity. Meanwhile, the FHA share of applications dipped to 18.5% from 19.9%, while the VA share climbed to 15.3% from 13.8%. The USDA share edged up to 0.6%.
Average rates for 30-year fixed mortgages with conforming balances fell to 6.49%, while jumbo loans dropped to 6.44%. FHA-backed 30-year fixed rates decreased to 6.27%. The 15-year fixed rate slipped to 5.70%, and the 5/1 ARM rate fell to 5.77%.
