A significant increase in mortgage interest rates in late December negatively impacted mortgage demand as the housing market entered its slowest period of the year. The Mortgage Bankers Association reported a 21.9% drop in mortgage application volume for the two weeks ending Dec. 27, 2024, with the average 30-year fixed-rate mortgage rate rising to 6.97%. This was an increase of 21 basis points from the previous year. Refinance applications fell by 36% from two weeks before but remained 10% higher compared to the same period a year ago. Mortgage applications for home purchases also decreased by 13% and were 17% lower than the previous year.
The increase in interest rates, which reached over 7% for the 30-year fixed-rate loans, led to declines in both refinance and purchase applications. The refinance share of mortgage activity decreased to 39.4% of total applications, down from 44.3% the prior week. Despite more homes being on the market compared to the previous year, many properties have been slow to sell due to high prices and increased interest rates.
The volatility in mortgage rates and applications during this period was further amplified by the holidays falling in the middle of the week, impacting market behavior. As mortgage rates started the following week above 7%, there was uncertainty about the market’s direction. Matthew Graham of Mortgage News Daily highlighted the excess volatility and momentum in the bond market during the final or first trading day of the year, which can be influenced by factors beyond the usual economic data and news events.
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