Mortgage rates and demand seem stuck in a holding pattern, as markets await tariff news

Mortgage rates and demand continue to stagnate as the market awaits the potential impact of tariff news. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) saw a minimal decrease from 6.71% to 6.70%, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index.

Mortgage application volume experienced a 1.6% drop last week compared to the previous week. This decrease is but a small fraction of the larger trend as mortgage rates have shown little to no movement in the past month. This, coupled with consumers' broader concern about the state of the economy, has resulted in a muted demand for mortgages.

Despite this, applications for a mortgage to purchase a home saw a 2% increase for the week and were 9% higher than the same week the previous year. This surge in demand from buyers reaches its highest level since the end of January, due largely to a 3% increase in conventional purchases. Conversely, demand for government loans, favored by lower-income borrowers, saw a 2% decline.

Joel Kan, MBA’s vice president and deputy chief economist, commented on the situation, "Overall purchase activity has shown year-over-year growth for more than two months as the inventory of existing homes for sale continues to increase, a positive development for the housing market despite the uncertain near-term outlook."

However, the picture isn't as rosy for those looking to refinance their home loans. Applications to refinance dropped by 6% for the week, although they remain 57% higher than the same week one year ago. The significant annual comparison is due to the low total volume. With mortgage rates having been 21 basis points higher the same week a year ago, there are fewer borrowers who can benefit from a refinance at the current rates.

The market is currently in a state of flux as it awaits news on tariffs, causing mortgage rates to start this week slightly lower but continue to move in a very narrow range. The uncertainty surrounding tariffs has kept the markets and potential borrowers guessing, contributing to the current holding pattern.

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