Mortgage Demand Plummets as Rates Soar to Close 2024

As the year 2024 drew to a close, the mortgage market experienced a significant downturn, with demand for mortgages diving nearly 22% in just two weeks. This sharp decline, reported by the Mortgage Bankers Association (MBA), was driven by a combination of factors, including a seasonal slowdown and a sharp rise in mortgage interest rates.



The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances surged to 6.97% in late December 2024, up from 6.89% two weeks prior. This increase, coupled with rising home prices, made it more challenging for potential homebuyers to afford homes. Total mortgage application volume dropped by 21.9% compared to the previous two weeks, reflecting the impact of higher rates on demand.

The seasonal slowdown in the housing market also played a significant role in the decline of mortgage demand. According to Mike Fratantoni, MBA's chief economist, "Mortgage rates moved higher through the last full week of 2024, reaching almost 7% for 30-year fixed-rate loans. Not surprisingly, this increase in rates — at a time when housing activity typically grinds to a halt — resulted in declines in both refinance and purchase applications."

Applications to refinance a home loan fell 36% from two weeks before, while applications for a mortgage to purchase a home fell 13%. The refinance share of mortgage activity decreased to 39.4% of total applications from 44.3% the previous week. This decline in refinance applications was likely due to the higher interest rates, which made it less attractive for homeowners to refinance their existing mortgages.

The increase in existing home inventory also had an impact on mortgage demand and pricing. As more homes became available, potential buyers had more options to choose from, which led to increased competition among sellers. This competition resulted in lower prices for existing homes, which, combined with the higher interest rates, made it more difficult for potential buyers to afford homes, leading to a decrease in mortgage demand.

In conclusion, the mortgage market experienced a significant downturn as 2024 came to a close, with demand for mortgages diving nearly 22% in just two weeks. This sharp decline was driven by a combination of factors, including a seasonal slowdown and a sharp rise in mortgage interest rates. As the housing market enters its typically slowest stretch of the year, potential homebuyers and investors should closely monitor mortgage rates and market trends to make informed decisions.