A temporary drop in interest rates gave mortgage demand a noticeable lift last week, snapping a period of sluggish activity in the housing market. Total mortgage application volume rose 9.4% from the previous week, according to the Mortgage Bankers Association (MBA), with seasonal adjustments made to account for the July Fourth holiday. The average rate for a 30-year fixed mortgage with conforming loan balances dropped slightly to 6.77%, down from 6.79%, marking the lowest level seen in the past three months.
Refinancing applications were quick to respond, climbing 9% for the week and up 56% compared to the same time last year. Purchase applications also saw a 9% weekly increase, with a 25% year-over-year gain. While these figures suggest rising consumer interest, experts caution that other market indicators tell a more complicated story. Joel Kan, MBA’s vice president and deputy chief economist, attributed the increase in homebuyer activity to growing housing inventory and slowing price growth. The average loan size for purchase applications, now $432,600, hit its lowest level since January 2025—another signal that buyers may be shifting toward more affordable homes.
Despite the increase in mortgage applications, the broader housing market continues to show signs of uncertainty. Cancellation rates for both new and existing home contracts remain elevated, and pending sales have not followed the same upward trajectory as mortgage demand. Mortgage rates began edging upward again just before the July Fourth holiday and have continued to climb slightly this week, according to Mortgage News Daily. Still, rates remain lower than they were in late spring. Matthew Graham, the outlet’s chief operating officer, suggested the market may simply be experiencing a brief reversal after a sustained downward trend in June.
While lower rates may help fuel bursts of activity, the path forward for the housing market remains unclear. With buyer sentiment still shaky and economic signals mixed, the coming weeks will be key in determining whether the recent momentum is temporary or the start of a longer-term shift.