Mortgage rates and demand are stuck in a holding pattern

• Mortgage demand from homebuyers barely moved last week.
• The average rate on the 30-year fixed mortgage rose slightly, despite lower Treasury rates.
• Refinance demand was 29% higher than last year, but that is coming off a very low volume.

Economic uncertainty at home or military conflicts overseas -- each taken alone -- would normally have a significant effect on the bond market. But now, even together, they have done little to move mortgage rates.

Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $806,500 or less, increased to 6.88% from 6.84%, with points decreasing to 0.63 from 0.66, including the origination fee, for loans with a 20% down payment. That according to the Mortgage Bankers Association.

“The combination of the ongoing conflict in the Middle East, current economic conditions, and last week's FOMC meeting resulted in slightly lower Treasury rates on average. However, mortgage rates still edged higher but remained in the same narrow range,” said Joel Kan, MBA's vice president and deputy chief economist.

Rates have moved in a roughly 25-basis-range, just around and below 7%, since early April. That has offered little incentive to homebuyers who are still facing overinflated home prices and still low supply of options for sale.

Applications for a mortgage to buy a home dropped 0.4% last week compared with the previous week, according to the MBA's seasonally adjusted index, which included a separate adjustment for the Juneteenth holiday. Purchase demand was 11% higher than the same week one year ago, but overall it is historically low.

“The average loan size for purchase applications declined to $436,300, the lowest level since January 2025, driven by decreasing conventional purchase loan sizes,” said Kan.

Applications to refinance a home loan rose 3% for the week and were 29% higher than the same week one year ago. The average rate on the 30-year fixed last year at this time was just 5 basis points higher. Again, volumes are so low that even small changes make for big percentage moves.