Mortgage Rates and Demand Remain Steady
Economic uncertainty and military conflicts have had minimal impact on bond markets, keeping mortgage rates stable.
A 'For Sale' sign is displayed in front of a home on May 12, 2025, in Miami, Florida. Economic uncertainty domestically and military conflicts abroad have had minimal impact on the bond market, resulting in stable mortgage rates. According to the Mortgage Bankers Association (MBA), the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) increased slightly to 6.88% from 6.84% last week, with points decreasing to 0.63 from 0.66, including the origination fee, for loans with a 20% down payment. Joel Kan, vice president and deputy chief economist at the MBA, stated, 'The combination of the ongoing conflict in the Middle East, current economic conditions, and last week's FOMC meeting resulted in slightly lower Treasury rates on average. However, mortgage rates still edged higher but remained in the same narrow range.' Since early April, rates have fluctuated within a 25 basis point range, hovering around 7%. This stability offers limited incentive to homebuyers facing high house prices and low inventory. Mortgage applications for home purchases decreased by 0.4% last week compared to the previous week, according to the MBA's seasonally adjusted index, which included an adjustment for the Juneteenth holiday. Purchase demand was 11% higher than the same week one year ago but remains historically low. Kan noted, 'The average loan size for purchase applications declined to $436,300, the lowest level since January 2025, driven by decreasing conventional purchase loan sizes.' Applications to refinance a home loan rose 3% for the week and were 29% higher than the same week one year ago. The average rate on the 30-year fixed mortgage last year at this time was just 5 basis points higher. Despite these increases, overall volumes remain low, making small changes result in significant percentage moves.