US Mortgage Applications Slip As Rates Hit 18-Week High

U.S. mortgage activity slowed again last week as interest rates climbed to the highest level since early January, putting further pressure on both refinancing and home purchases.

Mortgage applications fell 1.2% in the week ending May 23, following a 5.1% drop the previous week, according to the Mortgage Bankers Association data released Wednesday. 

The 30-year fixed mortgage rate rose to 6.98%, an 18-week high, up from 6.92% the week before. That compares with a rate of 7.05% in the same week last year.

Applications to purchase a home rose 2.7%, bouncing back slightly from a 5.2% decline the week prior. Refinancing activity, however, fell 7.1% – its third straight weekly drop.

The purchase index is up 2.9% so far in May after a modest 1.1% gain in April, but remains 7% below its January 2024 peak. Still, the index has climbed nearly 30% from its 28-year low in October 2023. Analysts project a 20% increase in purchase activity for the second quarter and a 13% gain for 2025, following an 8% drop in 2024 and a record 30% plunge in 2023.

Refinancing demand decreased by 10.3% in May, following a 4.1% decline in April. Even so, the refi index is up over 100% from its low in December 2022. Analysts forecast a 26% increase in refinancing for the second quarter and a 19% rise in 2025, following a 38% rebound this year and steep declines in the two years prior.

The five-year adjustable-rate mortgage averaged 6.22%, up from 6.16% last week but down from 6.64% a year ago.

Persistently high mortgage rates continue to weigh on overall housing activity, limiting growth not only in home sales but also in home improvement sales.

Earlier this month, during Home Depot’s first-quarter (Q1) earnings call, CEO Edward Decker noted that, despite strong fundamentals such as high home equity levels and wage growth, persistent macroeconomic uncertainty and elevated interest rates have delayed a rebound in larger remodeling projects.

“We’ve yet to see that large project,” Decker said. While smaller DIY activities, such as painting and yard work, have picked up, he said a broader remodeling cycle remains on hold until consumer confidence improves.

During the company’s most recent earnings call, Lowe's Executive Vice President Joseph McFarland also alluded that sales among its Pro customers, which include contractors, remodelers, and other professionals, are feeling less confident and cautious about the overall macro environment. 

The iShares U.S. Home Construction ETF (ITB) was flat in pre-market trade. ITB’s stock is down more than 12% this year. 

Meanwhile, the broader market was flat ahead of Nvidia’s (NVDA) earnings after the bell. 

The SPDR S&P 500 ETF Trust (SPY) edged 0.07% higher, and the Invesco QQQ Trust (QQQ), which tracks the Nasdaq 100, rose 0.24%. The SPDR Dow Jones Industrial Average ETF (DIA) traded flat.

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