Mortgage Demand Jumps as Interest Rates Hit Three-Month Low

Mortgage applications surged last week after interest rates briefly dropped to their lowest point in three months, according to the Mortgage Bankers Association (MBA), CNBC reports.

Total mortgage application volume increased by 9.4% on a seasonally adjusted basis compared to the previous week. This spike followed a slight decline in interest rates, with the average contract interest rate for 30-year fixed-rate mortgages decreasing to 6.77% from 6.79%. The figure applies to conforming loan balances of $806,500 or less, with points steady at 0.62, including origination fees, assuming a 20% down payment.

This rate reduction, although modest, significantly boosted refinancing activity. Refinancing applications rose by 9% week-over-week and were 56% higher compared to the same period last year. The surge is notable given the persistently high mortgage rates over the past several months, which had previously weakened refinancing demand.

Homebuyers also responded positively to the dip in interest rates, with applications for mortgages to purchase homes similarly climbing 9% for the week. Compared to the same time last year, purchase applications are up 25%.

Joel Kan, vice president and deputy chief economist at the MBA, attributed the increase in homebuyer demand to “increasing housing inventory and moderating home-price growth.” He noted that the average loan size for purchase applications, now at $432,600, is at its lowest since January 2025.

However, despite the recent uptick, the overall housing market remains complex. Consumer sentiment continues to fluctuate, and cancellation rates for home purchase contracts remain elevated for both new and existing properties. Additionally, pending sales—contracts that have been signed but not yet closed—haven’t risen in step with the recent spike in mortgage applications.

Mortgage rates have already begun climbing again since the brief dip. A separate report from Mortgage News Daily noted a recent upward trend but suggested it may not indicate a sustained increase.

“We often tend to see slightly brisk movement in the opposite direction after experiencing a consistent trend,” said Matthew Graham, chief operating officer of Mortgage News Daily.

Despite this recent rebound, he pointed out that current rates remain lower than any period since late April, except for the last few days of June.