Lower mortgage rates fuel a strong start as buyers and refinancers rush back into the market
Mortgage applications jumped 11.2% last week, continuing a strong start to the spring homebuying season.
The latest Mortgage Bankers Association (MBA) report shows demand picking up as mortgage rates continue to decline, encouraging more borrowers to enter the market.
The Market Composite Index, which measures total mortgage application volume, rose 11.2% on a seasonally adjusted basis and 12% unadjusted for the week ending March 7, 2025.
Falling mortgage rates have been a key driver of this increase. The average 30-year fixed-rate mortgage for conforming loan balances ($806,500 or less) dropped to 6.67% from 6.73% - the lowest level since October 2024.
"Mortgage rates declined for the sixth consecutive week,” said MBA deputy chief economist Joel Kan. “As a result, applications increased over the week and were up 31% from a year ago.”
This drop in rates has created renewed interest in refinancing. Refinance applications jumped 16% from the previous week and are now 90% higher than the same week in 2024. Purchase applications also gained traction, rising 7% seasonally adjusted and 8% unadjusted, putting them 4% higher than the same week last year.
"As we enter the spring homebuying season, the purchase index was more than 4% higher than a year ago, and activity was up across all loan categories," Kan said.
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Demand for government-backed mortgages was particularly strong. FHA purchase applications rose 11%, helped by a dip in FHA mortgage rates to 6.34%. Meanwhile, the VA share of mortgage applications increased to 15.9%, up from 14.6% the previous week.
At the same time, loan sizes have grown significantly. The average purchase loan amount hit $460,800, the highest ever recorded in the MBA’s survey, which dates back to 1990.
The March MCT Indices Report confirms this upward trend, showing a 27.91% increase in mortgage lock volume compared to the previous month. The increase follows a typical seasonal pattern, where market activity rebounds from the winter slowdown.
Analysts expect continued strength in March and April, as early-season buyers secure financing. However, total volume may taper off in the summer months as the initial wave of buyers finalizes purchases.
Market observers are closely watching the Federal Reserve’s next moves on interest rates, with expectations that the central bank will hold steady in March and May, before a potential rate cut in June.
Andrew Rhodes, senior director and head of trading at MCT, said upcoming economic indicators will be key in determining future rate adjustments.
“The expectation is that the Federal Reserve will likely hold the line on rates in March and May, with markets anticipating a likely rate cut in June. Economic performance given impending tariffs, Nonfarm Payroll, and the Consumer Price Index (CPI) will continue to be the biggest factors influencing rate decisions as we move into the summer months,” Rhodes said.
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