Refinancing slows, but applications continue to gain ground
Despite mortgage rates rising to their highest level since January, demand from homebuyers continued to grow last week, signaling resilience in a housing market still grappling with affordability challenges and economic uncertainty.
According to the Mortgage Bankers Association (MBA), the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 6.98% from 6.92% for the week ending May 23. This marks the third consecutive weekly increase and brings rates closer to the 7% mark, a threshold not seen since early 2025.
Even so, mortgage applications to purchase a home rose 2% compared to the previous week and were 18% higher than the same week one year ago.
“Purchase applications were up over the week and continue to run ahead of last year’s pace as increased housing inventory in many markets has been supporting some transaction volume, despite the economic uncertainty,” said Joel Kan, MBA’s deputy chief economist.
Conversely, refinance activity weakened amid the rising rate environment. Total refinance applications fell 7% week over week. “Conventional refinances were down 6%, and VA refinances dropped 16%,” Kan added. Nonetheless, refinance demand remains 37% higher than it was a year ago, when rates were significantly lower.
Homebuyers navigate a challenging market landscape
Mortgage data company Optimal Blue reported a national average of 6.922% for 30-year conforming loans as of May 28, only slightly changed from a day earlier but up about 10 basis points from a week ago. Government-backed loans also saw rate increases. The average 30-year FHA rate rose to 6.655%, and VA loans averaged 6.456%.
Although consumer confidence data this week showed mixed signals, concerns over the labor market prompted a slight dip in rates at the start of the holiday-shortened week. “Weaker labor conditions tend to push rates lower, all else equal, Matthew Graham of Mortgage News Daily told CNBC. Some lenders responded by adjusting their rates downward slightly.
Experts note that while today’s rates may appear high in contrast to pandemic-era lows, they remain near the historical average. “Short of another widespread disaster, experts agree we won’t encounter mortgage rates in the 2% to 3% range during our lifetimes,” a report from Fortune noted.
For prospective buyers, financial preparation remains key. Strong credit scores, low debt-to-income ratios, and comparison shopping among lenders are critical in securing favorable loan terms.
The uptick in demand despite higher borrowing costs suggests that buyers, particularly those looking for newly built homes, are still finding ways to navigate the market. In some cases, homebuilders are offering rate buydowns and incentives to ease monthly payments and close deals.
What strategies should brokers employ to help their clients secure financing? Share your insights below.
