Mortgage rates are hovering around the “key psychological level” of 7%, which is likely a factor in the slow pace of applications for both refinance and purchase mortgages, says the MBA chief economist.
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Although refinance demand is up from a year ago, homebuyers’ demand for mortgages continues to be hampered by rising mortgage rates, according to the Mortgage Bankers Association’s weekly lender survey.
According to MBA’s weekly mortgage application survey for the week ending January 17, purchase loan applications were essentially flat compared to the previous week, with a seasonally adjusted 1% increase.
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MBA Chief Economist Mike Fratantoni said in a statement that demand for purchase loans rose 2% year-over-year due to a slight increase in the number of applications for conventional mortgages for purchase by Fannie Mae and Freddie Mac. Ta.
Mike Fratantoni
“Mortgage rates remain near an important psychological level of 7%, which is likely to continue to slow the pace of both refinance and purchase activity,” Fratantoni said. “Due to economic indicators to be released in the future, the Fed is likely to leave policy unchanged for the time being, but given the uncertainty surrounding economic policy, long-term interest rates, including mortgage interest rates, are likely to remain stable at this level. expensive.”
Refinance requests fell 3% from the previous week, but rose 42% from a year earlier.
Prospective homebuyers and real estate agents are hopeful that 30-year fixed-rate mortgage rates will not return to the post-pandemic high of 7.83% set on October 25, 2023.
Mortgage interest rates rise from 2024 lows
Bond market investors, who fund most mortgages, are concerned the Federal Reserve is still not reining in inflation since it hit a 2024 low of 6.03% on September 17. As a result, mortgage interest rates have risen by 1 percentage point.
Bond market investors are also worried that President-elect Trump’s promised tariffs, tax cuts and mass deportations could reignite inflation.
Those concerns pushed 30-year fixed rate conforming mortgage rates this month above 7% for the first time since May 2024, according to rate lock data tracked by Optimal Blue.
Optimal Blue data shows interest rates on eligible 30-year fixed-rate conforming mortgages from Fannie Mae and Freddie Mac recorded Jan. 14 following release of “relatively benign” CPI report This indicates a slight decline from the highest level of 7.05% in 2025. The move ended speculation that inflation would force the Fed to raise interest rates this year.
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