Mortgage demand from homebuyers continues to recover, even with higher interest rates

Mortgage demand from homebuyers rose for the second straight week, suggesting that potential buyers are now more enticed by the increasing supply of houses for sale than they are dissuaded by recent economic uncertainty and concern over tariffs.

Total mortgage application volume rose 1.1% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $806,500 or less, increased to 6.86% from 6.84%, with points remaining unchanged at 0.68, including the origination fee, for loans with a 20% down payment. That rate was 22 basis points higher the same week one year ago.

Applications for a mortgage to purchase a home rose 2% for the week and were 18% higher than they were the year before. That was the second straight weekly gain after demand fell sharply for most of April. The previous week they rose by 11%.

“The news for the week was the growth in purchase applications,” said Michael Fratantoni, chief economist for the MBA. “Despite the economic uncertainty, the increase in home inventory means there are additional properties to buy, unlike the last two years, and this supply is supporting more transactions.”

He also noted a big gain in government purchase applications, up almost 5% for the week and 40% compared with a year ago. Government loans tend to be favored by lower-income or first-time homebuyers because they offer low down payment options.

Total active listings nationally are now about 14% higher than they were at this time last year, according to Redfin. New listings are up 5.5%.

Applications to refinance a home loan fell 0.4% for the week but were 44% higher than the same week one year ago. The refinance share of mortgage activity decreased to 36.4% of total applications from 37.1% the previous week.