Mortgage rates hovering near “key psychological level” of 7 percent, a likely factor in the slow pace of applications for both refinance and purchase mortgages: MBA chief economist.
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Homebuyer demand for home loans continues to be stymied by elevated mortgage rates, although demand for refinancing is up from a year ago, according to a weekly survey of lenders by the Mortgage Bankers Association.
The MBA’s Weekly Mortgage Application Survey for the week ending Jan. 17 showed applications for purchase loans were essentially flat compared to the week before, rising by a seasonally adjusted 1 percent.
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Looking back a year, demand for purchase loans was up 2 percent, thanks to a small increase in applications for conventional mortgages eligible for purchase by Fannie Mae and Freddie Mac, MBA Chief Economist Mike Fratantoni said in a statement.
Mike Fratantoni
“Mortgage rates remained near 7 percent, a key psychological level, which likely continues to slow the pace of activity for both refinances and purchases,” Fratantoni said. “Incoming economic data are likely to keep the Federal Reserve on hold for now, while uncertainties about economic policy are likely to keep longer-term rates, including mortgage rates, steady at these levels.”
Requests to refinance were down 3 percent week over week but up 42 percent from a year ago.
Would-be homebuyers and real estate agents are hoping that rates for 30-year fixe-rate conforming mortgages don’t return to a post-pandemic high of 7.83 percent registered on Oct. 25, 2023.
Mortgage rates climb from 2024 lows
Since hitting a 2024 low of 6.03 percent on Sept. 17, mortgage rates have climbed by a full percentage point as bond market investors who fund most mortgages worry that the Federal Reserve hasn’t yet tamed inflation.
Bond market investors are also concerned that tariffs, tax cuts and mass deportations promised by President-elect Trump could reignite inflation.
Those fears pushed rates on 30-year fixed-rate conforming mortgages above 7 percent this month for the first time since May 2024, according to rate lock data tracked by Optimal Blue.
Optimal Blue data shows rates on 30-year fixed-rate conforming mortgages eligible for purchase by Fannie Mae and Freddie Mac have eased slightly from a 2025 high of 7.05 percent registered on Jan. 14 following the release of a “relatively benign” CPI report that ended speculation that inflation might force the Fed to raise rates this year.
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