Mortgage demand drops nearly 10% to end 2025
Houses in Hercules, California, USA on Wednesday, November 12, 2025.
David Paul Morris | Bloomberg | Getty Images
Mortgage rates fell through the end of 2025 and the beginning of 2026, but this did little to drive demand back into the market.
For the week ending January 2, 2026, total mortgage application volume decreased 9.7% on a seasonally adjusted basis compared to two weeks earlier. Mortgage Bankers Association seasonally adjusted index Additional adjustments were made for holidays and the reading takes two weeks because the MBA did not report last week.
During those two weeks, the average contract interest rate for 30-year fixed-rate mortgages with loan balances of $806,500 or less dropped from 6.32% to 6.25%; Points including origination fee for loans with 20% down payment decreased from 0.59 to 0.57. This was the lowest level since September 2024.
Applications to refinance a mortgage fell 14% in the two-week period, but were still 133% higher than the same week a year ago.
“FHA refinancing applications saw a 19 percent increase, but this was a partial recovery from the previous week’s decline,” MBA economist Joel Kan said in the release. “MBA continues to expect mortgage rates to remain at current levels, with refinancing opportunities increasing in weeks when rates decline.”
Mortgage applications to buy a home are down 6% from two weeks ago and are up 10% from last year.
“The average loan size was $408,700, the smallest in a year, driven by lower average loan sizes across both conventional and government loan types,” Kan said. he added.
As mortgage interest rates decrease, the demand for adjustable-rate loans decreases. They offer lower rates but carry higher risk, so they are less popular when fixed interest rates are lower. ARM’s operating share fell to 6.3% of total applications.
Mortgage interest rates are virtually unchanged from this week because there is little economic data to influence them, according to a separate survey by Mortgage News Daily. This will change on Wednesday, when two labor market reports and the ISM’s services sector report will be published.
“On an individual basis, none of these are as heavy-hitters as Friday’s jobs report, but if they all sing a similar tune, that could certainly cause rates to move (for better or worse),” wrote Matthew Graham, chief operating officer of Mortgage News Daily. “In particular, if the data is stronger, it will likely push rates higher and vice versa.”
