A sharp rise in mortgage interest rates toward the end of December took its toll on mortgage demand, just as the housing market entered its usual slowest stretch of the year.
The total volume of mortgage applications for the two weeks ending December 27, 2024 fell 21.9% compared to the week before that period, according to the Mortgage Bankers Association’s seasonally adjusted index. An additional adjustment was made to account for the Christmas holidays. The MBA released two weeks of data after being closed for the holidays.
During that time, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $766,550 or less increased to 6.97% from 6.89%, with points rising to 0.72 from 0.67, including the origination fee, for loans with a 20% down payment. Mortgage rates, which had been lower than a year earlier for much of 2024, were 21 basis points higher annually.
“Mortgage rates rose during the last full week of 2024, reaching nearly 7% for 30-year fixed-rate loans,” said Mike Fratantoni, chief economist at the MBA. “Not surprisingly, this increase in rates, at a time when real estate activity typically grinds to a halt, has resulted in declines in both refinancing and purchase applications.”
Applications to refinance a mortgage loan, which are the most sensitive to interest rate fluctuations, fell 36% from two weeks earlier. Still, they remained 10% higher than the same period a year ago. The refinancing share of mortgage activity decreased to 39.4% of total applications from 44.3% the previous week.
Mortgage applications for the purchase of a home fell 13% in the two weeks and were 17% lower than the same period a year ago. While December is typically the slowest month of the year for home sales, these numbers are seasonally adjusted and the year-over-year comparison shows considerable weakness. While there are more homes on the market now than this time last year, many of those homes have been sitting idle for months due to high prices and higher interest rates.
Mortgage rates started this week above 7% over the 30-year fixed term, according to a separate Mortgage News Daily survey. Since the holidays fall on a weekday this year, there is significant volatility in all of these numbers.
“There is no way to know where the bond market will open on Thursday,” wrote Matthew Graham, chief operating officer of Mortgage News Daily. “The last or first trading day of a given year can experience excess volatility/momentum for reasons that have nothing to do with normal motivations (economic data, news, policy changes).”
