Mortgage rates have been on a declining trend, but demand slowed down last week largely due to fewer refinance applications, an indication that the industry should not expect a mini refi boom yet.
Mortgage applications dropped 10.1% for the week ending Aug. 16 compared to the previous week, according to data released Wednesday by the Mortgage Bankers Association (MBA).
The MBA’s survey — which covers 75% of all retail residential mortgage applications in the U.S. — found that the seasonally adjusted refinance index declined 15% from the previous week. When considering the volume of applications in the same week one year ago, the index was 90% higher.
The seasonally adjusted purchase index decreased 5% from one week earlier and reached its lowest level since February 2024.
“Both mortgage rates and mortgage applications have now stabilized after a few weeks of financial market volatility, which led to a quick drop in mortgage rates,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement.
“Home sales have slowed despite rising inventory levels. Even with lower mortgage rates, potential buyers might be more selective now that there are more options.”
Loan originators recently told HousingWire that rates are still too high for a refi boom and homeowners aren’t pulling the trigger to move to a new loan with a lower rate.
“We’ve had clients starting to call and ask, ‘Is now the right time to refinance?’ because everyone is expecting a rate cut in September,” said Kea Blevins, a senior mortgage loan officer at Atlantic Bay Mortgage Group. “Just because the rate starts to drop, does it really make sense for everyone? We’re just cresting the top of that hill.”
Mortgage rates have plateaued this week after declining sharply earlier this month, which was accompanied by a spike in the unemployment rate. This boosted expectations for a Federal Reserve cut at its September meeting.
The average 30-year, fixed-rate conforming mortgage dropped from 7% at the beginning of the month to 6.68% on Wednesday, according to HousingWire’s Mortgage Rates Center.
The MBA’s survey showed that the average contract interest rate for 30-year fixed-rate conforming loans (balances of $766,550 or less) decreased to 6.50% last week, down 4 basis points (bps) from the previous week. The average rate for jumbo loans (balances above $766,550) fell 10 bps to 6.68%.
Most loan officers don’t see a refi boom happening until mortgage rates drop to the 5% range as 88% of Fannie Mae single-family mortgage borrowers have a note rate below 6%.
Meanwhile, the refinance share of mortgage activity last week decreased to 46.3% of total applications, down from 48.6% the previous week.
The Federal Housing Administration (FHA) share of total applications rose from 13.5% to 15.6% during the period as FHA refi applications bucked the trend and rose for the sixth straight week.
The U.S. Department of Veterans Affairs (VA) share of total applications decreased from 16.8% to 15.3% during the week. And the U.S. Department of Agriculture (USDA) share increased from 0.3% to 0.4% during the same period.
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