Average U.S. mortgage rates were relatively steady this week, remaining near multi-month highs. Freddie Mac’s weekly survey showed the 30-year fixed-rate mortgage averaging about 6.81%, a slight dip from 6.83% the week prior (Freddie Mac). The 15-year fixed rate similarly edged down to roughly 5.94% (from 6.03% last week) (Freddie Mac). These minor declines follow a run-up in rates earlier in the month. Despite easing a touch, rates are hovering around their highest levels in over two months (Freddie Mac), reflecting volatility in the bond market. Elevated mortgage rates continue to challenge affordability, though they are modestly below the peaks seen in 2024.
Mortgage application activity fell sharply amid the higher-rate environment. The Mortgage Bankers Association’s composite index of applications dropped 12.7% on a seasonally adjusted basis from the prior week (Mortgage Bankers Association). Refinance applications plunged by about 20% week-over-week, while home purchase applications declined roughly 7% (Mortgage Bankers Association). MBA noted that 30-year mortgage rates climbed to around 6.9% – a two-month high – over the survey week, which dampened demand (Mortgage Bankers Association). Borrowers have become more rate-sensitive: with rates near 7%, many would-be refinancers and buyers are staying on the sidelines. On the purchase side, application volume remains slightly above last year’s very subdued levels, but both conventional and government loan applications pulled back this week (Mortgage Bankers Association).
There were no major policy moves from the Federal Reserve this week, but markets are looking ahead to the Fed’s early-May meeting. The Fed is widely expected to hold its benchmark interest rate steady at that meeting (Federal Reserve), after having implemented several rate cuts late last year when inflation began cooling. Fed officials have signaled a pause for now, awaiting clearer signs of economic slowdown or financial stress (Federal Reserve). While the Fed didn’t directly intervene in markets this week, its stance is an important backdrop keeping mortgage rates elevated.
Policymakers in housing finance made some noteworthy moves. The Federal Housing Administration (FHA) issued new guidance tightening its lending criteria: a recent HUD mortgagee letter will bar non-permanent resident borrowers from obtaining FHA-insured loans (for case numbers issued on or after May 25, 2025) (HUD Mortgagee Letters). Meanwhile at the federal housing agencies, new FHFA Director Bill Pulte has begun rolling back some programs. Under his direction, Fannie Mae and Freddie Mac are now prohibited from participating in Special Purpose Credit Programs (SPCPs) designed to broaden credit access (FHFA News). These changes – announced via social media and informal guidance – signal a shift in housing policy priorities. No announcements were made regarding interest rate policy itself, but the regulatory tweaks underscore a more conservative approach toward mortgage credit from Washington this week.
Mortgage lenders continued to face headwinds in the current high-rate climate. First-quarter earnings reports from big banks underscored the industry’s slowdown. For example, JPMorgan Chase and Wells Fargo each reported over 20% year-over-year declines in home loan originations in Q1 2025 (CNBC Bank Earnings). Mortgage production at many large lenders remains well below last year’s levels as higher borrowing costs curtail both refinance and purchase loan volume. In response to weaker demand and rising costs, banks have tightened mortgage credit standards over recent quarters (Federal Reserve Senior Loan Officer Survey). Federal Reserve surveys confirm that banks, dealing with interest rate risk and economic uncertainty, have made underwriting more stringent for almost all types of home loans (Federal Reserve Senior Loan Officer Survey).
Many lenders are also cutting staffing and expenses to adapt. The rapid rise in rates and drop-off in mortgage volume over the past year has led to thousands of layoffs industry-wide (National Mortgage News). Both large and non-bank mortgage companies have been consolidating operations after the boom times faded. Despite these challenges, a few lenders have pursued strategic initiatives – for instance, some are investing in technology platforms or broker partnerships – aiming to capture market share when conditions improve. Overall, the lending environment remains cautious: underwriting is more conservative and institutions are focused on efficiency as the spring market unfolds under unusual pressure.
Housing market indicators this week reflect a cooler spring selling season, closely tied to mortgage conditions. With financing costs still high, home sales have slowed significantly. Sales of existing homes plunged in March, registering the largest monthly drop since late 2022 (National Association of Realtors). The traditionally busy spring period has been muted so far – buyer traffic is thinner and many would-be sellers are holding off, given the cost of trading into a new mortgage. On the supply side, more listings are gradually coming to market. Active inventory has been rising; in fact, the number of homes for sale is roughly 33% higher than a year ago (National Association of Realtors). This growing supply has started to temper home price gains – home prices are still inching up nationally, but at a much slower pace than before (National Association of Realtors). Even with the recent inventory build, overall housing supply remains relatively constrained by historical standards, which is helping to prevent prices from falling in most areas.
In the new-home market, builders are seeing some glimmers of demand. New home sales and construction traffic have ticked up modestly, though activity is below initial expectations for the season (U.S. Census Bureau). Homebuilders continue to offer incentives (such as price reductions and rate buydowns) to attract buyers, mitigating some of the affordability strain. These incentives, coupled with slightly lower rates at times, have enticed a portion of buyers who might otherwise stay on the sidelines. Overall, the housing market is sending mixed signals: higher mortgage rates are keeping many buyers cautious, but increased inventory and builder incentives are providing a bit of relief. Industry observers are watching to see if any sustained momentum builds as we head deeper into the spring – for now, the mortgage and housing data suggest a gradually improving supply situation but subdued demand given the still-elevated cost of borrowing (U.S. Census Bureau).