Lower mortgage rates drew more homebuyers last week

Two straight weeks of declining mortgage rates have awakened the housing market. In a significant shift for the mortgage market, loan applications surged by 20.4% in the week ending February 28, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. 

This increase reflects both a seasonally adjusted and unadjusted rise, with the latter showing a 22% jump from the previous week.

Slightly lower rates also prompted current homeowners to refinance their mortgages, with the Refinance Index rising a remarkable 37% from the prior week. Refinancing was up 83% over the same week in 2024.

The Purchase Index rose by 12% week-over-week, standing 2% higher than the same week a year ago.

Joel Kan, MBA’s deputy chief economist, attributed the surge to declining mortgage rates, which fell to 6.73% for 30-year fixed-rate mortgages—the lowest since December 2024. Ironically, Kan attributes part of the decline to what he called a “souring consumer sentiment and uncertainty over new tariffs on imported goods." 

That uncertainty drove many investors into 10-year Treasury bonds, sending yields lower. Mortgage rates are keyed to the interest rate on the 10-year bond.

Saving money by refinancing

While many buyers decided to pull the trigger because of lower mortgage rates, it was recent homebuyers with 7% mortgage rates who hoped to cash in. The refinance share of mortgage activity increased to 43.8% from 38.9% the previous week, while the adjustable-rate mortgage (ARM) share rose to 5.8%. The FHA share of total applications slightly decreased to 16.7%, whereas the VA share increased to 14.6%.

Interest rates for various mortgage types also saw declines. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased to 6.73%, and for jumbo loan balances, it fell to 6.83%. Rates for 15-year fixed-rate mortgages dropped to 6.12%, and 5/1 ARMs decreased to 5.85%.

As the spring homebuying season approaches, these developments indicate potential green shoots in the housing market, with purchase activity continuing to outpace last year's levels.