Purchase loan applications soared 10 percent last week to the highest level since April, even though rates have been stuck in the high sixes, the Mortgage Bankers Association reported Wednesday.
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Mortgage rates aren’t coming down, but improving inventory in many markets helped drive up homebuyer demand for purchase loans to the second highest level of the year last week, the Mortgage Bankers Association reported Wednesday.
Demand for purchase mortgages was up by a seasonally adjusted 10 percent last week when compared to the week before, and 20 percent from a year ago. Requests to refinance were also up 16 percent week over week and 28 percent from a year ago, the MBA’s latest Weekly Mortgage Applications Survey found.
“Coming out of the Memorial Day holiday, mortgage applications increased to the highest level in over a month, driven by growth in both purchase and refinance applications,” MBA Deputy Chief Economist Joel Kan said in a statement.
Joel Kan
“Despite ongoing uncertainty surrounding the economy, homebuyers seem to be taking advantage of loosening housing inventory in certain markets,” Kan said.
Consumer sentiment about the housing market improved in May to the highest level since November, according to Fannie Mae’s monthly National Housing Survey.
While just 26 percent of Americans said May was a good time to buy, that’s up from 23 percent in April and 14 percent from a year ago, a survey low.
Mortgage rates stabilize
Rates for 30-year fixed-rate mortgages hit a 2025 low of 6.48 percent on April 4, according to lender data tracked by Optimal Blue.
Since climbing in early April over fears about the potential for tariffs to reignite inflation, rates for 30-year fixed-rate loans have been rangebound in the high sixes for the last 2 months.
Although inflation is nearing the Fed’s 2 percent goal, Fed policymakers are in a wait-and-see mode, while they assess the impacts of the Trump administration’s policies on tariffs, immigration, taxes and regulation. The job market is cooling off, but not quickly enough to alarm Fed policymakers.
The CME FedWatch tool, which tracks futures markets to predict the probability of future Fed moves, shows investors see no chance that the U.S. central bank will cut rates when policymakers meet next week.
But after an encouraging inflation report from the Bureau of Labor Statistics on Wednesday, futures markets tracked by the CME FedWatch tool priced in a 70 percent chance of a Sept. 17 rate cut, up from 62 percent on Tuesday.
Inflation moving in the right direction
The Consumer Price Index (CPI) showed the price of goods and services rose 2.35 percent from a year ago in May. While that’s up slightly from 2.31 percent in April, forecasters were expecting a bigger jump.
So far, tariffs are only having a “microscopic” impact on consumer prices, Pantheon Macroeconomics Chief U.S. Economist Samuel Tombs said in a note to clients. But he noted that it usually takes at least 3 months for retailers to pass cost increases on to consumers.
“Looking ahead, we continue to expect increases in prices for CPI core goods to gather momentum in June, then peak in July and remain above-trend for the rest of the year, assuming the current set of tariffs remain in place,” Tombs said.
The Federal Reserve’s preferred gauge of inflation, the personal consumption expenditures (PCE) index, showed the price of goods and services rose 2.1 percent in April from a year ago, the Bureau of Economic Analysis reported May 30.
The PCE index for May will be released on June 27.
Tombs said Pantheon Macroeconomics forecasters expect core PCE inflation, which excludes volatile food and energy prices, will climb to a peak of 3.25 percent around the end of the year.
Purchase loan demand rebounds
Source: MBA Weekly Applications Surveys.
The MBA’s seasonally adjusted purchase loan index, which is benchmarked to March 1990, soared above 300 when mortgage rates plummeted to historic lows during the pandemic. But as inflation and mortgage rates surged in 2022, the index dropped below 200.
At 170.9 during the week ending June 6, the index is up 34 percent this year and approaching a 2025 high of 172.7 registered during the week ending April 4.
In addition to adjusting for seasonal factors — demand for homes usually peaks in the spring — last week’s index results included an adjustment for the Memorial Day holiday.
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