Mortgage Applications Fall 1.2% in April 2025 Despite Interest Rates Dropping to 6.5%

Meg Cunningham is an experienced freelance writer specializing in state and national politics and policy analysis.

In the week ending April 28, 2024, mortgage applications dropped by 1.2% despite a slight decrease in interest rates, signaling that many prospective homebuyers remain cautious as they await potentially improved market conditions this summer.

Key Highlights

• Mortgage applications decreased by 1.2% in the last week of April 2024.
• The average 30-year fixed mortgage rate fell by five basis points to 6.5%, the first decline in three weeks.
• Several state financial officers express concern over a new Federal Housing Finance Agency rule that could impact the housing market and banking stability.

The decline in applications coincided with the average 30-year fixed mortgage rate dropping to 6.5%, according to the Mortgage Bankers Association (MBA). Although this rate is 114 basis points lower than a year ago, ongoing challenges such as affordability issues, supply chain disruptions, and Federal Reserve policies continue to suppress homebuyer demand.

Joel Kan, MBA's Vice President, noted, "Elevated interest rates are reducing homebuyer affordability and diminishing refinancing demand. Purchase activity remains highly sensitive to rates and local market inventory levels. However, the growing availability of newly built homes offers more choices for buyers."

Rising Home Prices and Shrinking Inventory

Data from Black Knight's Mortgage Monitor Report reveals that home prices increased for the third consecutive month in March 2024, while active listings hit their lowest point since April 2022. The report highlights a nationwide trend where limited for-sale inventory collided with modestly increased buyer demand, driving prices upward.

Andy Walden, Black Knight's Vice President of Enterprise Research, explained, "The modest uptick in buyer interest met a declining supply of homes for sale, leading to continued price gains after a brief pullback at the end of 2022."

Active listings have declined for six straight months, with nearly 90% of major markets experiencing reduced supply. New listings are also down by 30% compared to pre-pandemic levels, intensifying the shortage.

Adding to market complexities, a new Federal Housing Finance Agency rule now adjusts fees on Fannie Mae and Freddie Mac loans based on borrowers' credit scores, introducing risk-based pricing that could impact affordability and market stability. Twenty-seven state financial officers have raised concerns about the potential economic effects and the strain on the banking sector.

The MBA reports that lender caution is increasing, with the jumbo-conforming loan spread narrowing to 13 basis points from 64 basis points in November 2022, reflecting reduced appetite for jumbo loans amid banking sector uncertainties.

These factors collectively contribute to a challenging environment for homebuyers navigating the 2024 housing market.

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