The Mortgage Bankers Association (MBA) has released its latest data, revealing a significant decline in mortgage applications. The Market Composite Index, a measure of mortgage loan application volume, decreased by 21.9 percent on a seasonally adjusted basis from two weeks earlier. This decrease is the largest since February 2024, when applications dropped by 24.5 percent. The unadjusted index decreased by 55 percent compared with two weeks ago, indicating a substantial slowdown in the mortgage market.



The decline in mortgage applications can be attributed to several factors, including rising interest rates and a slowing housing market. The average contract interest rate for 30-year fixed-rate mortgages increased to 6.97 percent, the highest level since July 2024. This increase in rates makes borrowing more expensive for homebuyers and refinancers, reducing affordability and discouraging potential buyers. Additionally, the housing market has been slowing down, with home prices and sales volumes decreasing. In 2023, single-family home sales fell by 17 percent compared to 2022, indicating a decrease in demand for housing.

The refinance share of mortgage activity decreased to 39.4 percent of total applications from 44.3 percent the previous week, as homeowners are less likely to refinance their mortgages at higher interest rates. The adjustable-rate mortgage (ARM) share of activity decreased to 5.2 percent of total applications, as borrowers prefer the stability of fixed-rate mortgages. The FHA share of total applications decreased to 16.6 percent from 17.2 percent the week prior, while the VA share of total applications increased to 15.7 percent from 15.2 percent the week prior.

The decline in mortgage applications is a concerning trend for the housing market, as it indicates a decrease in demand for housing and a slowdown in the market. However, it is important to note that the holiday season can also contribute to a decrease in mortgage applications, as the market typically slows down during this period. As interest rates and the housing market stabilize, we may see an increase in mortgage applications in the future.

In conclusion, the decline in mortgage applications is a significant development in the housing market, driven by rising interest rates and a slowing housing market. As the market stabilizes and interest rates decrease, we may see an increase in mortgage applications and a recovery in the housing market.