Even as mortgage rates hover near three-year lows, borrower sensitivity persists.
Mortgage applications fell 8.5% in the week ended Jan. 23, according to the latest reading of the Mortgage Bankers Association's market index released on Wednesday. The data includes an adjustment for the Martin Luther King Jr. holiday last week.
The overall pullback in demand was driven by a 16% decline in refinances from the previous week. Purchase applications were also modestly lower than the week prior.
It's a murky update. On the one hand, that ebb came as the average 30-year, fixed-rate mortgage saw its biggest increase since December. That said, the decrease in refinance demand was expected, according to Joel Kan, vice president and deputy chief economist at the MBA.
At the same time, though, a big-picture look reveals a brighter view of the mortgage market. Even though the average 30-year, fixed-rate mortgage increased on a weekly basis, it's still near a three-year low. Daily mortgage rates, too, have been on a downward trajectory — recording a five-day streak of declines as of Tuesday afternoon, according to Mortgage News Daily.
That trend has kept both refinance and purchase demand significantly higher than the same time a year ago. In the week ended Jan. 23, refinance demand was 156% higher than the comparable week in 2025, and purchase applications were up 18% over the same period of time. Furthermore, the average loan size remained at the highest level since September.
Taken together, those are all signals that "prospective homebuyers remain active at the start of 2026," Kan said.
Borrower sensitivity could be tested again this week, though. The Federal Reserve is set to release its latest interest rate decision on Wednesday. While the central bank doesn't set mortgage rates, its decisions typically send ripples through the economy that reach the mortgage market.
