Borrowers are seizing on the sharp drop in mortgage rates, delivering the strongest week of loan demand since 2022.
Last week, mortgage rate averages decreased and then clocked their largest daily decline since last summer. Now, new data from the Mortgage Bankers Association shows just how much of an impact that movement had on borrower demand.
The association's index measuring mortgage loan application volume rose 9.2% in the week ended Sept. 5, after accounting for the Labor Day holiday. That growth was driven by demand from homeowners looking to refinance their existing loans and homebuyers looking to get in on the market.
As of Tuesday, the daily 30-year, fixed-rate mortgage was 6.29%. The most recent average, through the week ended Thursday, was 6.56%.
Borrowers clamor for lower mortgage rates
Refinance demand was 12% higher than a week earlier and 34% higher than the same week a year earlier. Meanwhile, demand for purchase loans was up 7% from a week earlier. This was the strongest week for borrower demand since 2022, according to Joel Kan, MBA's vice president and deputy chief economist.
"Purchase applications increased to the highest level since July and continued to run more than 20% ahead of last year’s pace," he said in a statement. “The holiday-adjusted refinance index had its strongest week in a year and the average loan size for refinances also increased significantly, since borrowers with large loans are more sensitive to bigger rate moves. Refinance applications accounted for almost 49% of all applications last week.”
That growth — particularly in the refinance sector — was largely expected by lenders and industry experts. Steve Trautwein, director of military lending at Intercoastal Mortgage, said on Friday that his phone had been ringing off the hook after the big daily decrease in rates.
“It’s going to be a very busy weekend,” he told Homes.com in an interview. “It’s been a long time. A long time coming. But I look forward to 14-hour days on Saturday and Sunday.”
The index also showed a pickup in adjustable-rate mortgage applications. The rates for those mortgages "were considerably lower than fixed-rate loans, which typically benefits homebuyers," according to Kan.
Unlike fixed-rate mortgages that come with a set interest rate, ARMs are characterized by their variable interest rates. An ARM allows a borrower to lock in one rate for a set period — five or seven years, for example. That rate is usually lower than you would get with a fixed-rate mortgage. But, after that period lapses, the rate will move according to the market benchmark the lender has chosen.
It's a risky option because, as the name implies, monthly payments are variable. Some borrowers see ARMs as an entry point to homeownership, though, especially if they foresee rates decreasing in the future.
Is the active mortgage market here to stay?
The recent burst in mortgage activity comes after a historic lull in borrower demand and elevated borrowing costs.
Although things have started moving more in the last few weeks, there's still reason to proceed with caution, especially because the recent movement has come at the cost of strength elsewhere in the economy.
On Tuesday, for example, the Bureau of Labor Statistics released updated stats showing that the jobs market was significantly weaker in 2025 than first reported.
"We got some weaker economic data that showed the employment sector is weakening, and the bond market is basically saying, ‘look, the economy is in a recession,” Melissa Cohn, regional vice president of William Raveis Mortgage, said in a statement.
In other words, according to Cohn, lower mortgage rates could be the new normal, but that comes at the risk that consumers could be feeling pain elsewhere. And no matter how low mortgage rates are, it isn't easy to get a loan if you aren't employed or your investments aren't as valuable as they once were.