Home for sale in Austin, Texas, on May 22, 2024.
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The sharp rise in mortgage interest rates towards the end of December weighed on mortgage demand, arriving just as the housing market entered its typically slowest period of the year.
Total mortgage application volume for the two weeks ending Dec. 27, 2024, was down 21.9% compared to the week before that period, according to the Mortgage Bankers Association's seasonally adjusted index. An additional adjustment has been made to account for the Christmas holiday. The MBA released data for two weeks after closing for the holiday.
During that period, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $766,550 or less rose to 6.97% from 6.89%, with points increasing to 0.72 from 0.67, including origination fees, for loans with Interest: 20% down payment. Mortgage rates, which were lower than a year earlier for most of 2024, were 21 basis points higher annually.
“Mortgage rates rose during the last full week of 2024, reaching nearly 7% for 30-year fixed-rate loans,” said Mike Fratantoni, MBA's chief economist. “It is not surprising that this increase in interest rates – at a time when housing activity would typically grind to a halt – will lead to a decline in refinancing and purchase applications.”
Home loan refinancing applications, which are most sensitive to interest rate fluctuations, were down 36% from the previous two weeks. However, it remained 10% higher than the same period last year. Refinancing's share of mortgage activity fell to 39.4% of total applications from 44.3% the previous week.
Mortgage applications to buy a home fell by 13% over the two weeks, and were 17% lower than the same time last year. While December is typically the slowest month of the year for home sales, these numbers are seasonally adjusted, and the year-over-year comparison shows significant weakness. While there are more homes on the market now than there were last year at this time, many of those homes have been sitting for months, due to rising prices and rising interest rates.
Mortgage rates this week started above 7% over 30 years, according to a separate survey by Mortgage News Daily. Since the holidays fall in the middle of the week this year, there are significant fluctuations in all of these numbers.
“There is no way to know where the bond market will open on Thursday,” Matthew Graham, chief operating officer of Mortgage News Daily, wrote. “The last or first trading day of any year can see some excess volatility/momentum for reasons unrelated to normal drivers (economic data, news, policy changes).”
