Mortgage demand spiked from admittedly low levels following last week’s announcement that Fannie Mae and Freddie Mac may purchase up to $200 billion in mortgage-backed securities (MBS) to subsidize mortgage rates at the instruction of President Donald Trump.
Home loan applications fell nearly 10% over the two-week holiday period ending Jan. 2, which included Christmas, Hanukkah, Kwanzaa and New Year’s.
The following week, ending Jan. 9, mortgage demand rebounded sharply, according to the latest figures released Wednesday from the Mortgage Bankers Association (MBA). Trump confirmed his MBS purchase plan for the government-sponsored enterprises (GSEs) in a social media post on Jan. 8.
The Market Composite Index, a measure of mortgage application volume, jumped 28.5% on a seasonally adjusted weekly basis, posting a 65% rise when not accounting for seasonal factors. Though Fannie and Freddie had begun slowly buying MBS last fall, the announcement by Trump had an immediate impact on mortgage rates.
“Mortgage rates dropped lower last week following the announcement of increased MBS purchases by the GSEs,” said Joel Kan, deputy chief economist at the MBA, in commentary accompanying Wednesday’s data release.
This shift sparked a surge in refinance applications, the component index for which rose 40% from the previous week to notch its strongest week since October. The trend suggests a month of strong refinance activity in December has spilled into the start of 2026.
Optimal Blue reported this week that refinance lock volumes jumped 13% from November to December, spurred by yearly lows in mortgage rates, defying a seasonal slowdown.
Even purchase buyers made a splash last week, boosting the unadjusted purchase index 51% higher compared with the previous week and 13% higher than a year ago. Kan said that lower rates and higher inventory “kept potential homebuyers active in the market.”
The refinance share of mortgage activity rose to 60.2% of all applications from 56.6% the previous week, while the adjustable-rate mortgage (ARM) share of activity rose to 7%.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances fell to 6.18% from 6.25% and 6.32% over the preceding three weeks, while average rates for a 30-year fixed-rate loan insured by the Federal Housing Administration (FHA) dropped to 6.08% from 6.09% and 6.15% over the same period.
The share of applications for FHA-backed mortgages slipped to 19.2% from 20% the previous week, while the share of home loans backed by the Department of Veterans Affairs fell to 16.1% from 17.3% the week prior.
