The mortgage industry has been pleasantly surprised by positive developments in purchase application numbers this spring as many borrowers have taken advantage of dips in mortgage rates driven by economic uncertainty.
The Mortgage Bankers Association (MBA) has noted multiple significant spikes in mortgage applications in April and May, according to its Market Composite Index, a measure of mortgage loan application volume.
The largest such increase was recorded the week ending April 4, when applications jumped 20 percent on a seasonally adjusted basis from the previous week, reaching their highest level since September last year. Lenders also witnessed a 35 percent jump in the refinance index to a level 93 percent higher than the same week one year earlier.
MBA economists have pointed to falling mortgage rates, driven by market volatility, as a major contributing factor to this trend.
“Mortgage applications increased by 20 percent to [the] highest level since September 2024, driven by purchase and refinance applications picking up in a volatile week where economic uncertainty caused rates to drop across the board,” MBA Vice President and Deputy Chief Joel Kan said in a press release for the week ending April 4. “The 30-year fixed mortgage rate was 6.61 percent, the lowest rate since October 2024. Both homebuyers and refinance borrowers were quick to take advantage of this dip in rates, driving the purchase index 24 percent higher than a year ago to the strongest pace since January 2024.”
The uptick in refinance applications, Kan explained, occurred primarily among borrowers with larger loan sizes who he said “tend to be more sensitive to rate changes, adding that “the average refinance loan size jumped to its second highest in the survey at $399,600.”
Following a few subsequent weeks of modest declines in application activity, MBA reported another notable spike to lead off the month of May with an 11 percent jump in both purchase and refinance applications.
Once again, MBA attributed the uptick in applications to a decline in mortgage rates stemming from sustained concerns related to economic uncertainty.
“The economic news last week included a negative reading for first-quarter GDP growth and further signs of contraction in the manufacturing sector, mixed with a solid employment report for April,” MBA Senior Vice President and Chief Economist Mike Fratantoni said. “The net impact on mortgage rates was mostly downward but just back to levels from early April.”
The 30-year fixed rate dropped to 6.84 percent the first week of April as conventional purchase application volume rose 13 percent to a point 9 percent higher than the same time a year earlier.
Fratantoni characterized the rise in application volume as a “surprisingly strong move given lingering economic uncertainty.”
As Kan noted in his analysis a month prior, Fratantoni pointed out that “borrowers of conventional loans tend to have larger loan sizes and more apt to be move-up buyers.”
MBA Builder Application Survey (BAS) data for April revealed that new home purchases were up 5.3 percent for the month, compared to the same month one year prior and up 2 percent compared to March 2025. MBA noted the change did not account for any adjustment for typical seasonal patterns.
“Despite the ongoing economic uncertainty and mortgage rate volatility, April was a strong month for new home purchase activity, with applications posting an annual gain for the second straight month,” Kan said, regarding the BAS results. “The applications index reached its highest level in the survey’s history dating back to 2012. Additionally, MBA’s estimate of new home sales also increased over the month to a 718,000 seasonally adjusted annualized pace, its strongest pace since October 2024. As the unsold inventory of new homes continues to grow in many parts of the country, reduced buyer competition and pricing pressures supported more buying activity over the month.”
MBA reported a 42 percent increase in commercial/multifamily borrowing in the first quarter, also driven by economic factors.
It is notable that the same economic uncertainty driving applications up is expected to lead to future upticks in delinquencies and foreclosures among Department of Veteran Affairs (VA) loan borrowers barring an act of Congress.
The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to 4.04 percent of all loans outstanding by the end of the first quarter on a seasonally adjusted basis.
MBA Vice President of Industry Analysis Marina Walsh noted the “mixed results” in first-quarter mortgage performance could be followed with a rise in foreclosures moving forward. She said this increase will likely be particularly significant among VA loans given the expiration of the Veterans Affairs Servicing Purchase (VASP) program with no replacement loss mitigation option approved by Congress.
“Further increases in the foreclosure rate could result if economic conditions worsen and loan workout options are unavailable,” Walsh said.