An aerial view of houses in a neighborhood on August 27, 2025 in San Francisco, California.
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The Federal Reserve cut its interest rate last week and, like the last two times, mortgage rates rose. This led to a decline in demand for home loans and refinancing.
According to the Mortgage Bankers Association's seasonally adjusted index, total mortgage application volume fell 3.8% last week compared to the previous week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of 806,500 or less increased from 6.33% to 6.38%, with points for loans with a 20% down payment increasing from 0.60 to 0.62, including the origination fee.
“Mortgage rates rose slightly last week following the FOMC meeting as investors interpreted the comments as a signal that we are nearing the end of this rate-cutting cycle. As a result, mortgage applications fell slightly,” MBA senior vice president and chief economist Mike Fratantoni said in a press release.
The number of applications to refinance a home loan fell 4% this week and was 86% higher than the same week a year ago. At this time last year, the interest rate on 30-year bonds was 37 basis points higher. That's not a huge difference, but borrowers who took out a loan two years ago when interest rates were well above 7% could benefit from refinancing now.
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Mortgage applications to purchase a home fell 3% for the week and were up 13% year over year.
“Purchase application volume typically falls quickly at year-end, and this changes the business mix. The refinancing share reached 59 percent last week, the highest level since September,” Fratantoni added, noting that refinancing activity has remained largely the same over the past month as interest rates continue to remain in roughly the same narrow range.
Mortgage rates fell slightly earlier this week, according to a separate survey from Mortgage News Daily. This followed new government employment data. Markets are still awaiting government inflation data expected on Thursday.
“This is the most impactful monthly inflation report, and inflation is the other half of the Fed’s interest rate equation,” wrote Matthew Graham, chief operating officer at Mortgage News Daily.