Applications Sink On Unaffordability, Holiday Slowdown

Mortgage applications sank last week as the holiday slowdown collided with rising rates.

The Mortgage Bankers Association’s weekly survey shows that the adjusted Market Composite Index — a measure of mortgage loan application volume — fell by 3.7% last week.

The data includes an adjustment for the New Year’s holiday.

Rates rose a fourth consecutive time, up from 6.97% to 6.99%. This is their highest point since July 2024.

As a result, applications declined across the board. Adjusted purchase applications were down by 7%, while the unadjusted index was up 43% but 15% lower year-over-year.

Conventional and government loans all took a hit as purchases slowed to their worst pace since February 2024.

“Applications decreased last week as rising mortgage rates continued to discourage buyers from entering the market and put a damper on purchase activity,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.

“Refinance applications increased despite higher rates, but the increase was compared to recent low levels and was driven entirely by an increase in VA refinances, which continue to show weekly swings.”

Refi applications were up 2% on the week but down 6% YOY. Their share of mortgage activity rose to 40.8% of total applications, edging closer to their past-decade average of 58% after tanking post-Covid.

The holiday season brings a typical slowdown to the housing market, but this year’s doldrums have been even worse thanks to climbing rates and continued unaffordability.

Still, a December pullback in demand has resulted in greater numbers of actively for-sale homes. New listings were up 0.9% YOY, offering opportunities to savvy house hunters.

Buyers should move fast when they see a listing they like, however, as existing inventory remains low and won’t budge for the foreseeable future. More than a third of current homeowners never plan to sell their house, and the rest are waiting at least a few years before wading back into the market.