After stabilizing over preceding weeks of easing geopolitical volatility, mortgage application volumes may have begun to show wartime fatigue heading into May.
Total application volumes fell for a second straight week as mortgage rates crept higher from monthly lows in mid-April, the Mortgage Bankers Association (MBA) reported in a Wednesday update to its weekly tally of home loan applications.
The Market Composite Index, a measure of mortgage loan application, declined 4.4% on a seasonally adjusted basis over the week ending May 1, anchored by the refinance share of activity declining to its lowest levels since August. The refinance share of total applications slipped to 42% from 42.5% the previous week.
Mortgage borrowing costs are broadly hovering around October and November levels, MBA data shows. The refinance component index fell 5% over the week but remained 29% higher than a year ago, when the average mortgage rate for a 30-year fixed-rate home loan was 6.84%.
While purchase applications slowed from recent weeks of acceleration, declining 4% over the last week of April, volumes remained 5% above year-ago levels, according to the unadjusted purchase component index. That measure was 21% higher on a yearly basis over the preceding week, however.
“The ongoing conflict in the Middle East continues to push rates higher,” said Joel Kan, deputy chief economist at the MBA. “Mortgage rates last week increased to their highest level in a month, with the 30-year fixed rate rising to 6.45%.”
Experts ultimately forecast a higher floor for mortgage rates for the foreseeable future if the Iran war drags on and inflationary pressures persist. Significant hits to economic output and labor could leave room for Federal Reserve interest rate cuts in 2026, others project. The Fed does not set mortgage rates.
The average loan size on purchase applications rose to its highest level since the MBA survey’s launch in 1990, hitting $467,300 last week.
“This increase could indicate that potential first-time buyers, and buyers looking for homes at lower price points, might be the most hesitant to move forward given the economic uncertainty and higher rates,” Kan explained.
The share of applications for mortgages insured by the Federal Housing Administration (FHA) increased to 17.7% from 17.2% the previous week, while the share of applications for mortgages backed by the Department of Veterans Affairs eased to 14.9% after having held at 15% over the previous two weeks.
MBA data shows average mortgage rates for 30-year fixed-rate loans rose to 6.45% last week from 6.37% the prior week. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA inched higher to 6.12% from 6.09% during the week ending April 24.
