Mortgage Rates Decline, But Homebuyer Demand Remains Lukewarm

Mortgage rates experienced a notable drop last week, yet the anticipated surge in homebuyer demand has yet to materialize. While refinancing activity saw an increase, the overall mortgage application volume remained relatively stable, signaling a cautious approach from prospective buyers amid ongoing economic uncertainties.

Mortgage Rate Trends

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($832,750 or less) decreased to 6.09% from 6.17%, according to the Mortgage Bankers Association (MBA). Points also fell to 0.53 from 0.56, including the origination fee, for loans with a 20% down payment. This marks the lowest level since September 2022. Mortgage Bankers Association

Refinance and Purchase Applications

Applications to refinance a home loan increased by 4% last week compared to the previous week and are 150% higher than the same week one year ago, when rates were 79 basis points higher. Despite these significant year-over-year gains, it’s important to note that refinancing activity was quite low during the same period last year.

Conversely, applications for a mortgage to purchase a home decreased by 5% for the week but remain 12% higher year over year.

Economic Uncertainty and Home Sales

While lower mortgage rates are improving affordability, home prices remain slightly elevated compared to last year, and economic uncertainty continues to weigh on consumer sentiment. Redfin reported that nearly 40,000 home sale agreements nationwide were canceled in January, representing 13.7% of homes that went under contract. This is up from 13.1% a year ago and the highest January share since records began in 2017. Redfin

Adjustable-Rate Mortgages Gain Traction

Borrowers are increasingly exploring adjustable-rate mortgages (ARMs) as a way to secure lower rates. The ARM share remained above 8%, as ARM rates were more than 80 basis points below conforming fixed rates. This trend suggests that payment-sensitive borrowers or those seeking larger loans are finding ARMs an attractive option.

Industry Events and Advocacy

The Mortgage Bankers Association (MBA) is hosting several upcoming events, including the State and Local Workshop in Washington, DC (April 13-14, 2026), the National Advocacy Conference (April 14-15, 2026) in Washington, DC, and the Legal Issues and Regulatory Compliance Conference (May 4-7, 2026) in Miami, FL. MBA Events The Washington Mortgage Bankers Association (WMBA), an affiliate of the MBA, is also actively involved in advocating for the mortgage industry in Washington State. WA-MBA

Looking Ahead

The mortgage market remains sensitive to economic indicators and shifts in interest rate expectations. While the recent decline in mortgage rates is a positive sign, sustained increases in homebuyer demand will likely depend on further improvements in economic confidence and a stabilization of home prices.