Mortgage rates in the United States eased to their lowest level in a month last week, offering some relief to borrowers and driving a pickup in refinancing activity, even as demand from homebuyers remained subdued against a backdrop of economic uncertainty and geopolitical tensions.
Data from the Mortgage Bankers Association showed total mortgage application volume rose 1.8% on a seasonally adjusted basis from the previous week.
The increase was largely driven by refinancing activity, which tends to be highly sensitive to short-term rate movements.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $832,750 or less declined to 6.42% from 6.51%.
Points, including the origination fee, increased slightly to 0.62 from 0.61 for loans with a 20% down payment.
Refinancing activity picks up
Lower borrowing costs encouraged homeowners to refinance existing loans.
Applications to refinance a home rose 5% during the week and were 15% higher compared with the same period a year ago.
“Given the evolving situation in the Middle East and its impact on energy and commodity prices, mortgage rates declined last week,” said Joel Kan, an economist at the Mortgage Bankers Association.
Market participants have been closely tracking geopolitical developments, particularly the conflict involving the US, Israel and Iran, which has triggered volatility in oil prices and, in turn, influenced bond yields and interest rates.
Matthew Graham, chief operating officer at Mortgage News Daily, said the war has been a key driver of recent market movements.
“As for the drivers of the market movement, it’s the same old story since the beginning of March. The Iran war is the primary source of motivation,” he wrote, adding that oil prices remain closely correlated with bond yields.
Homebuyer demand remains weak
While refinancing activity improved, demand from prospective homebuyers continued to weaken.
Applications to purchase a home fell 1% from the previous week and were 3% lower than the same week a year earlier.
“Purchase activity remained subdued as potential homebuyers remained hesitant given the current economic uncertainty,” Kan said, noting that purchase applications have now fallen below year-ago levels for a second consecutive week.
The reluctance among buyers reflects broader concerns over affordability and economic stability, as higher borrowing costs and uncertainty about the outlook weigh on sentiment.
Housing market shows signs of slowdown
Recent data suggests the US housing market is losing momentum.
Existing home sales dropped 3.6% in March to a seasonally adjusted annual rate of 3.98 million units, marking the lowest level since June 2025 and falling short of economists’ expectations.
The decline highlights how quickly market conditions have shifted, despite some improvement in affordability earlier in the year.
Rising mortgage rates and geopolitical risks have eroded purchasing power and dampened demand.
Inventory levels have improved modestly but remain constrained.
The number of homes available for sale increased 3.0% month-on-month to 1.36 million units in March, up 2.3% from a year earlier.
At the current pace of sales, it would take 4.1 months to exhaust existing inventory, slightly higher than 4.0 months a year ago but still below levels typically associated with a balanced market.
Inventory trends remain uneven
The increase in supply has been driven largely by single-family homes, with inventory in this segment rising 7.8% year-on-year.
However, inventory for condominiums and cooperative housing declined sharply, raising questions about data consistency.
Despite the modest rise in inventory, analysts say supply constraints continue to limit options for buyers, contributing to subdued transaction volumes.
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