Rates Plummet As Economic Outlooks Sour
Mortgage applications finally benefited from cooling rates as dour economic outlooks translated to greater affordability.
The Mortgage Bankers Association’s weekly survey shows that the adjusted Market Composite Index — a measure of mortgage loan application volume — jumped by 20.4%, reversing the week prior’s 1.2% drop.
Adjusted purchase applications were up 9%, while the unadjusted index increased 12% and was 2% higher year-over-year.
After inching down across several weeks, rates finally saw a big dip, registering their largest weekly decline since November 2024. The 30-year fixed rate fell to 6.73% from 6.88%.
Refinances rose by 37% on the week, its fastest pace since October 2024. They accounted for 43.8% of applications and were up 83% YOY.
Government refis surged in particular as the FHA rate slipped to 6.42%.
“[C]onventional refinance applications rose 34% and government refinance applications increased by 42% over the week. The move in government refinances was driven by a 75% increase in VA loans, which have been prone to large changes in recent months,” Joel Kan, MBA’s Vice President and Deputy Chief Economist, commented.
While rate relief is great for borrowers struggling under record unaffordability, Kan noted that uncertainty and economic unhappiness drove the declines.
“Mortgage rates declined last week on souring consumer sentiment regarding the economy and increasing uncertainty over the impact of new tariffs levied on imported goods into the U.S.,” he said.
Homebuilding costs are set to surge due to President Donald Trump’s tariff war. Goods from Canada and Mexico, where builders get necessary materials like lumber and drywall, face a 25% tax. This is on top of the 14.5% already levied on Canadian lumber.
Though Trump wants to increase lumber production in the U.S., American companies are widely expected to set their prices to match imported supply.
The tariffs could increase costs by nearly $10,000 per home, according to the National Association of Home Builders.
Nonetheless, Kan suggested that greater affordability should boost demand over the next few months.
“These are more green shoots as we head into the spring homebuying season,” Kan said.