Mortgage demand from homebuyers increased for the second consecutive week, pointing to a shift in buyer sentiment. Rather than being deterred by recent economic instability or tariff concerns, potential buyers appear to be motivated by a growing supply of homes on the market. According to the Mortgage Bankers Association (MBA), total mortgage application volume rose 1.1% last week, indicating renewed interest in homeownership as inventory expands.
Stable Mortgage Rates and Rising Applications Reflect Strengthening Buyer Confidence and Market Activity
While demand grew, mortgage rates remained relatively stable. The average interest rate for 30-year fixed-rate mortgages with conforming loan balances increased slightly to 6.86% from 6.84%. Points stayed constant at 0.68 for loans with a 20% down payment. Although the rate remains elevated, it is only moderately higher—by 22 basis points—compared to the same period last year. These conditions reflect a market where affordability remains a challenge, but increased supply is helping to offset some of the pressure.
Homebuyers Reignite Market as Inventory Grows and Government-Backed Loans Boost DemandThe standout trend was the 2% weekly increase in mortgage applications to purchase homes, marking an 18% jump year-over-year. This followed an 11% rise the previous week, signaling a strong rebound after April’s sluggish performance. Michael Fratantoni, the MBA’s chief economist, highlighted that the uptick in inventory is a key factor enabling more transactions. With more properties available, buyers are finding more opportunities to enter the market.
Government-Backed Loans Surge as Refinance Activity Slows Amid Expanding Housing Supply
A notable element of the recent activity is the significant increase in government-backed purchase applications, which rose nearly 5% for the week and 40% compared to the same week last year. These types of loans, typically used by first-time or lower-income buyers, are gaining popularity due to their more accessible terms, such as lower down payment requirements. This trend suggests that a broader segment of the population is re-entering the market.
Despite the uptick in purchase activity, applications to refinance existing mortgages dipped slightly, falling 0.4% for the week. However, refinance activity still showed a robust 44% increase year-over-year. The share of refinancing in total mortgage activity decreased to 36.4% from 37.1% the previous week, showing a relative decline as new purchase activity picks up steam. The current market is showing signs of resilience driven by growing supply and expanding buyer interest.
