Mortgage applications fall, rates stagnant to open 2025

The mortgage market rang in the new year with a thud.

Home loan application activity dropped 3.7% between the Christmas and New Year's Day periods, according to the Mortgage Bankers Association's Weekly Applications Survey. Interest rates were also stagnant for the week ending Jan. 3, with the 30-year fixed-rate mortgage sitting on the cusp of 7%.

"Purchase applications declined for both conventional and government loans and dropped to the slowest weekly pace since February 2024," said Joel Kan, the MBA's vice president and deputy chief economist in a press release. 

The trade group's Purchase Index and Refinance Index fell 7% and 2% in the past week, respectively, including an adjustment for the holiday. Refinance activity was also down 6% compared to the same time last year, when rates were slightly lower on their 2024 debut. Kan noted volatility in Department of Veterans Affairs-backed refis, which shot up last week. 

Refis made up 40.8% of originations last week, up slightly from the prior period's 38.4% mark. 

The 30-year fixed-rate mortgage was 6.99%, still benchmarked to the 2024 conforming loan limit of $766,550 in effect through last Tuesday. Jumbo loans above that threshold also finished the week with the same rate, dropping 14 basis points from 7.13% over Christmas. 

A new higher conforming loan limit this week probably won't nudge buyers. Already beset by the slow-but-steady rising price of homes, around a third of owners pledge not to sell in the coming years, according to a recent Redfin study. Over 85% of homeowners today have interest rates below 6%. 

The effective rate for 5/1 adjustable rate mortgages inched down, with rates at 5.98%. Federal Housing Administration-backed loans also dipped slightly, to 6.65% last week. 

Only the 15-year FRM climbed, rising three basis points to 6.46% last week.