A potential buyer and a real estate agent look through a window in a bedroom during an open house at a home in Seattle, Washington, U.S., Sunday, Jan. 18, 2026.
David Ryder | Bloomberg | Getty Images
As the war in Iran continues to grip the world, interest rates are everywhere. This created a split in mortgage demand last week, with refinancing declining and homebuyer demand rising as the spring market began.
Total mortgage application volume rose 3.2% for the week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $832,750 or less increased from 6.09% to 6.19%, with points for loans with a 20% down payment increasing from 0.52 to 0.58, including the origination fee.
“Financial markets were volatile last week amid ongoing turmoil in the Middle East,” Mike Fratantoni, chief economist at MBA, said in a press release. “Borrowers have been able to achieve conforming 30-year rates below 6 percent in recent weeks, but given the current volatility, longer-term rates have increased.”
The number of home loan refinancing applications increased by just 0.5% compared to the previous week and was 81% higher than the same week a year ago.
The seasonally adjusted purchasing index rose 7.8% this week and was 11% higher than the same week a year ago. As winter weather finally eases across much of the country, buyers are starting to arrive, but prices are still high, prompting some to take advantage of lower-down-payment loans.
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“Buying activity increased last week, particularly for FHA loans, which increased more than 11 percent,” Fratantoni added. “More inventory in the market supports more transactions.”
Although there is more inventory, it is still well below pre-pandemic levels. A National Association of Realtors report on closed sales in February showed there was only 3.8 months of inventory of homes for sale. Six months is considered a balanced market between buyer and seller.
Consumers are also increasingly looking for variable rate loans, which offer lower interest rates but higher risk. ARM’s share of activity rose to nearly 9% of total applications last week.
Mortgage rates fell slightly earlier this week, according to a separate survey from Mortgage News Daily. While bond yields were already fluctuating on news from the Trump administration about the war’s progress, there could be additional volatility following Wednesday’s release of a key monthly inflation gauge, the consumer price index.
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