Mortgage rates have remained steady for roughly two months, giving current borrowers and potential homebuyers little incentive to enter the market. Total mortgage application volume was essentially flat last week, increasing only 0.2% from the prior 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 of $806,500 or less rose slightly to 6.40% from 6.37%, while points decreased to 0.60 from 0.62, including the origination fee, for loans with a 20% down payment. This is the highest rate level since early October. By comparison, during the same week last year, the average rate was 46 basis points higher.

Despite the small increase in rates, applications to purchase a home climbed 8% for the week and were 20% higher than the same week a year ago, driven largely by buyers seeking lower-cost loans. The government purchase index, which includes FHA, VA, and USDA applications, rose 9% for the week, marking its strongest weekly performance since 2023.

“Affordability continues to challenge many markets, and government loan programs remain appealing to qualified buyers seeking to purchase a home. The average purchase loan size has decreased to its lowest level in two months,” said Joel Kan, MBA Vice President and Deputy Chief Economist.

Refinance applications dropped 6% for the week but were 117% higher than the same week one year ago. This significant annual increase reflects the unusually low activity last year rather than a refinance boom.

Mortgage rates eased slightly at the start of this week, according to a separate survey by Mortgage News Daily (MND). “Rather than credit any recent events, the improvement in rates/bonds is mostly due to idiosyncratic trading conditions often seen during major holiday weeks,” explained Matthew Graham, chief operating officer at MND. “Some contributing factors include weaker weekly employment data from ADP and speculation that rate-friendly Kevin Hassett may become the next Fed Chair.”