Homebuyer mortgage demand drops annually for first time in over a year

Mortgage rates finally fell further last week, but that wasn’t enough to help the struggling mortgage market. Economic uncertainty fueled by the Iran war is keeping interest rates high and homebuyers at bay. As a result, total mortgage application volume fell 0.8% last week compared to the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with loan balances of $832,750 or less decreased from 6.57% to 6.51%; Points including the origination fee for loans with 20% down payment decreased from 0.65 to 0.61.

Mortgage applications to buy a home rose 1% this week but were 7% lower than the same week a year ago. This was the first annual decline since January 2025.

“However, some loan types and geographic segments are doing better than others due to lower rates on ARM and FHA loans as well as rising housing inventories in some local markets,” MBA economist Joel Kan said in a statement. “FHA purchase applications increased 5 percent for the week, supported by the FHA mortgage rate being approximately 30 basis points lower than the conventional mortgage rate.”

Applications to refinance a mortgage fell 3% for the week and were 4% lower than the same week a year ago. This was also the first year-over-year decline in refinancing since January 2025.

“Many potential refinancing borrowers were frozen due to the sharp increase last month. The pace of refinancing applications was at its lowest level since December 2025,” Kan said.

Mortgage rates have been flat since the beginning of this week but are expected to fall further Wednesday after President Donald Trump announced a two-week ceasefire on Tuesday night. The yield on the US 10-year Treasury note, which is loosely tracked by mortgage rates, fell sharply on this news.