Mortgage applications fell over the holiday period despite lower rates

Mortgage demand cooled during the holiday period, even as borrowing costs moved lower. For investors tracking housing, the weekly mortgage application data offers an early look at whether lower rates are pulling buyers and refinancers back into the market.

The Mortgage Bankers Association said its Market Composite Index, a measure of total mortgage loan application volume, fell 9.7% on a seasonally adjusted basis from two weeks earlier in the week ended Jan. 2, 2026. MBA said the results include a holiday adjustment.

On an unadjusted basis, total applications were down 28% compared with two weeks earlier, according to MBA’s Weekly Mortgage Applications Survey.

Purchase demand slipped, but stayed above last year

The seasonally adjusted Purchase Index, which tracks applications for loans to buy homes, declined 6% from two weeks earlier, MBA said. On an unadjusted basis, purchase applications fell 23% from two weeks earlier but were 10% higher than the same week a year ago.

Joel Kan, MBA’s vice president and deputy chief economist, said purchase applications were up from a year earlier but fell over the week after decreases in conventional and Federal Housing Administration applications. Conventional loans are mortgages that are not insured by a government agency, while FHA loans are backed by the Federal Housing Administration and are often used by borrowers with lower down payments or different credit profiles.

Kan also said the average loan size was $408,700, the smallest in a year. He attributed that to lower average loan sizes across both conventional and government loan types.

A separate analysis of MBA’s purchase index said purchase application activity remains depressed, while sitting above the lows reached in 2023 and above the lowest levels seen during the housing bust.

Refinancing stayed far above last year’s level

MBA said its holiday-adjusted Refinance Index fell 14% from two weeks earlier but was 133% higher than the same week one year ago. The unadjusted Refinance Index dropped 31% from two weeks earlier and was 108% higher than a year earlier.

Kan said mortgage rates began the new year by falling to 6.25%, the lowest level since September 2024. He said refinance applications rose 7% for the week, though at a slower pace than in the weeks before the holidays.

Kan added that FHA refinance applications increased 19%, which he described as a partial rebound from a decline the prior week. He said MBA expects mortgage rates to remain near current levels, with periods of refinancing opportunities when rates move lower.

Refinancing tends to become more attractive when mortgage rates fall below the rate borrowers already have. That can lower monthly payments or change loan terms, though the benefit depends on fees, loan size and each borrower’s situation.

Average 30-year rate fell to 6.25%

MBA said the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $806,500 or less decreased to 6.25% from 6.32%.

Points decreased to 0.57 from 0.59, including the origination fee, for loans with an 80% loan-to-value ratio, MBA said. Mortgage points are upfront fees tied to the loan amount, while loan-to-value ratio compares the mortgage balance with the home’s value.

The refinance index has risen from its bottom as mortgage rates declined, according to the separate analysis, but remains below its recent September peak as rates have moved sideways.

This story draws on original reporting from Calculated Risk.