Weekly mortgage applications fell by a seasonally adjusted 3.7% for the week ending Jan. 3, according to the Weekly Mortgage Applications Survey from the Mortgage Bankers Association (MBA). The decrease in applications included an adjustment for the New Year’s holiday.

While the index, which is a measure of mortgage loan application volume, was down 3.7% from the previous week, it actually increased 47% on an unadjusted basis. Refinancing was up 2% from the previous week, but 6% lower than the same week one year ago.

The seasonally adjusted Purchase Index decreased 7% from the previous week. However, the unadjusted Purchase Index shot up 43% when compared to the previous week and was 15% lower than the same week one year ago.

Refinancing accounted for 40.8% of total applications, up from 39.4% the previous week. Federal Housing Administration loans increased to 16.9% of applications, up from 16.6% the week before. Veterans Administration loans accounted for 16.2% of the applications, up from 15.7% from the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 4.7% of total applications.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766.550 or less) increased to 6.99% from 6.97% the previous week. The average contract for jumbo loans (greater than $766.550) decreased to 6.99%, from 7.13% the week before.

“Applications decreased last week as rising mortgage rates continued to discourage buyers from entering the market and put a damper on purchase activity. The 30-year fixed rate increased for the fourth consecutive week, reaching 6.99 % – the highest rate since July 2024,” said Joel Kan, MBA’s vice president and deputy chief economist. “Purchase applications declined for both conventional and government loans and dropped to the slowest weekly pace since February 2024. Refinance applications increased despite higher rates, but the increase was compared to recent low levels and was driven entirely by an increase in VA refinances, which continue to show weekly swings.”