Mortgage Market Split: Why Purchase and Refi Demand Are Moving in Opposite Directions
Hey everyone, here’s something important I’ve been tracking in the mortgage world that’s worth discussing—especially if you're in the market for a home, thinking about refinancing, or just keeping an eye on real estate trends.
Recently, mortgage rates hit a new high not seen since January, with the 30-year fixed rate climbing to 6.98%. This marks the third consecutive weekly increase. That’s big news because it’s having a very different impact on two key parts of the market: purchasing new homes versus refinancing existing mortgages.
Let’s start with refinance demand. It’s taken a clear hit. According to the latest data from the Mortgage Bankers Association (MBA), refinance applications dropped 7% from the week before. That’s no surprise when rates are rising—refinancing only makes sense when borrowers can lock in something meaningfully lower than their current rate, and right now, that opportunity just isn’t there for most people.
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On the flip side, purchase demand is actually showing signs of resilience. Purchase applications rose 3% week-over-week and are up a striking 18% compared to the same period last year. That’s a good sign that despite high borrowing costs, people are still entering the market—likely encouraged by a slow but steady increase in housing inventory.
Joel Kan, MBA’s Deputy Chief Economist, attributes the pressure on rates to volatility in the Treasury markets, which has kept the spread between Treasury yields and mortgage rates wider than usual. That means even when Treasury yields stabilize, mortgage rates are staying relatively high—at least for now.
There is, however, a small glimmer of relief. New daily rate tracking from Mortgage News Daily suggests mortgage rates are leveling off a bit after a steep three-week climb. While this might not be enough to spark a refinance surge just yet, it could ease some of the pressure on new buyers.
Another key stat to note: refinance applications now make up just 34.6% of total mortgage activity, down from 36.6%. Adjustable-rate mortgage (ARM) share ticked up slightly, likely as borrowers look for lower initial rates. FHA and VA loan activity remained mostly unchanged.
What this all signals is a market in transition. The era of ultra-low rates is behind us for now, and that means different behaviors from buyers and existing homeowners. Refi demand is sensitive and quick to pull back when rates climb. Purchase demand, however, is proving to be more durable—perhaps because, for many, life moves on whether rates are ideal or not.
So if you’re watching this space, keep an eye not just on rate movements, but on how buyers and refinancers are responding. That divergence tells us a lot about where the housing market may be headed next.
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