Mortgage Demand Dips Despite Falling Rates
Mortgage request volume experienced a slight decline last week, despite a drop in interest rates, continuing a recent trend of sluggish demand. According to the Mortgage Bankers Association (MBA), total mortgage application volume fell 1.2% for the week ending September 3, 2025, compared to the previous week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances (loans of $806,500 or less) decreased to 6.64% from 6.69%. Points also decreased slightly, moving to 0.59 from 0.60, including origination fees, for loans with a 20% down payment. This represents the lowest rate seen since April 2025.
While refinance applications saw a modest 1% increase for the week - and are 20% higher than the same week in 2024 – purchase applications decreased by 3%. Purchase applications remain 17% higher than the same week last year, indicating continued, though now slowing, buyer interest.
The MBA notes that potential homebuyers now have a greater selection of properties available compared to this time last year, but are facing higher prices nationally, creating an affordability challenge.
Joel Kan, deputy chief economist at the MBA, explained that the refinance increase was largely driven by activity in FHA and VA loans. “The FHA rate is averaging about 30 basis points lower than the conventional rate in 2025, wich has made those loans relatively more appealing to eligible borrowers,” he stated. He also noted that purchase activity “pulled back…as slower homebuying activity led to declines in applications across the various loan types.”
Mortgage rates began the current week slightly higher following activity in the European bond market. Key economic reports scheduled for release this week, including the monthly employment report on Friday, are expected to potentially influence mortgage rate movement.
