Mortgage applications witnessed a significant uptick last week as refinancing activity reached its highest level since October, propelled by a sustained decline in mortgage rates, as reported by the Mortgage Bankers Association. The market composite index, an essential metric that gauges loan application volume, climbed approximately 20% for the week ending February 28, based on seasonally adjusted figures, following two consecutive weeks of decline.
When viewed without seasonal adjustments, the index experienced a robust increase of 22%. As mentioned by Joel Kan, the deputy chief economist of the association, the decline in mortgage rates was a response to deteriorating consumer sentiment regarding the economy, coupled with rising uncertainties stemming from the imposition of new tariffs on imported goods entering the United States.
Recent policies introduced by US President Donald Trump, notably the 25% tariffs on imports from Canada and Mexico, came into effect on Tuesday. In addition, the government's doubling of tariffs on products from China has provoked countermeasures from both Canada and China. The refinance index surged to its most significant pace since October, witnessing a remarkable increase of 37%, driven predominantly by both conventional and government loan applications.
The rates for 30-year mortgages categorized under conforming loan sizes of $806,500 or less decreased to 6.73%, marking the lowest rate since December, a drop from the previous week’s 6.88%. For loans exceeding this threshold, the rate fell to 6.83% from an earlier 7%. Moreover, the Federal Housing Administration-backed 30-year loan rates also saw a decline, dropping from 6.57% to 6.42%, while the share of FHA loans decreased to 16.7% of total applications from the previous rate of 17.4%.
Weekly adjustments also revealed an increase of 9% in the seasonally adjusted purchase index. Kan reflected on this period, noting, 'Typically, we observe an escalation in purchase activity, and indeed, purchase applications were up over the week and are continuing at rates surpassing those of last year.
This presents several promising indicators as we transition into the spring homebuying season.'.