Holiday Mortgage Demand Plummets 22% as Rates Approach 7%

Mortgage demand plunged 22% during the holiday season, driven by rising rates nearing 7%, with refinance applications dropping sharply.

A recent report from the Mortgage Bankers Association (MBA) highlights a sharp decline in mortgage applications as the year wraps up.

The last survey index of 2024, released on Thursday, showed that rising mortgage rates overshadowed the usual seasonal trends intended to stabilize activity during the holiday season.

Decline in Mortgage Applications

During the week ending December 27, mortgage demand plunged by 21.9% compared to the previous two weeks.

The most notable drop came from refinance applications, which fell by 36%, while applications for new home purchases saw a reduction of 13%.

When looked at year-over-year, refinance demand showed a 10% increase, but purchase demand decreased by the same percentage.

Mike Fratantoni, MBA’s senior vice president and chief economist, pointed out that during the final full week of December, mortgage rates continued their upward momentum, nearing 7% for 30-year fixed-rate loans.

He explained how this rise in rates, coinciding with a typically slower housing market, naturally led to fewer applications for both refinancing and home purchases.

Rising Mortgage Rates

Supporting this trend, data from HousingWire’s Mortgage Rates Center indicated that home loan rates kept climbing in the last weeks of the year.

By Thursday, the average rate for 30-year conforming loans hit 7.10%, representing a 21-basis-point surge over the preceding two weeks.

Meanwhile, rates for 15-year conforming loans also turned upward, increasing by 7 basis points to reach 7.02%.

Although mortgage demand had shown positive signs throughout most of November and December, the MBA’s index—having experienced five consecutive weeks of growth—suffered its first setback in the week ending December 13.

Market Share Insights

As of December 27, the portion of refinance applications dropped to 39.4%, which is nearly 5 percentage points lower than two weeks earlier.

Performance varied across government lending programs; applications for Federal Housing Administration (FHA) loans dropped by 60 basis points to hold a market share of 16.6%.

In contrast, Department of Veterans Affairs (VA) loan applications increased by 50 basis points, reaching a 15.7% share.

Interest rate increases were noticeable across different loan types.

For instance, the average contract interest rate for 30-year fixed loans with balances of $766,550 or less rose by 8 basis points, settling at 6.97%.

Jumbo loan rates climbed even higher, increasing by 14 basis points to 7.13%.

Additionally, FHA loans recorded slight upticks, averaging 6.69%, while 15-year fixed loan rates reached 6.37%.

Conversely, 5/1 adjustable-rate mortgages saw a decline, dropping by 14 basis points to average 5.97%.

The MBA’s weekly applications survey provides a comprehensive look at closed-end residential mortgage applications from both retail and consumer-direct channels, using a benchmark index set at 100 in March 1990.

This survey serves as an important indicator of evolving trends within the mortgage market.

Source: Housingwire