Mortgage applications drop 9.7% despite lower rates

"The refinance index, adjusted for holidays, fell 14% from two weeks earlier but was 133% higher than the same week a year ago. The unadjusted refinance index dropped 31% over the period and was 108% higher than a year earlier. Refinancing accounted for 56.6% of total mortgage activity, up from 53.8% the prior week. The seasonally adjusted purchase index decreased 6% from two weeks earlier."

"Mortgage rates started the New Year with a decline to 6.25%, the lowest level since September 2024. Refinance applications were up 7% for the week but were at a slower pace than in the weeks leading up to the holidays, said Joel Kan, MBA's vice president and deputy chief economist. FHA refinance applications saw a 19% increase, although that was a partial rebound from a drop the week before."

Refinance activity showed a strong year‑over‑year gain despite declines from two weeks earlier: the holiday‑adjusted refinance index fell 14% but was 133% higher than a year ago, and the unadjusted index fell 31% while remaining 108% above last year. Refinancing comprised 56.6% of mortgage activity. The seasonally adjusted purchase index decreased 6% from two weeks earlier, with the unadjusted purchase index down 23% and 10% higher than a year ago. Mortgage rates fell to 6.25%, prompting a 7% weekly rise in refinance applications and a 19% rebound in FHA refinances. Average loan size dropped to $408,700, ARMs fell to 6.3% share, and FHA, VA, and USDA shares all increased.

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