Mortgage rates increased one basis point last week according to the Freddie Mac Primary Mortgage Market Survey released on January 29th. Mortgage rates remain near their lowest levels in three years, which is encouraging for potential homebuyers who have waited to enter the market for some time. Lower rates, combined with strong income growth, have led to a steady increase in purchase applications compared to last year. More homeowners refinancing their mortgages are also benefiting from these lower rates, as shown by the rise in refinance applications over the past year.
Mortgage applications decreased 8.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending January 23rd. “Mortgage rates increased for the first time in a month, and as expected, refinance applications fell by 16 percent. The 30-year fixed rate was the highest in three weeks” said MBA’s Joel Kan, Vice President and Deputy Chief Economist. “FHA refinance activity bucked the overall trend and increased, as FHA rates remained almost 20 basis points lower than conforming rates. With rates holding in the 6 percent range, the refinance market is likely to remain sensitive to week-to-week rate movements.” Added Kan, “Purchase applications were 18 percent higher than last year’s pace, and the average loan size stayed at its highest level since September 2025, signaling that prospective homebuyers remain active at the start of 2026.”
The number of Americans filing new applications for unemployment benefits fell last week from an upwardly revised level in the prior week, suggesting layoffs remained low, but tepid hiring is stoking households’ anxiety about the labor market. Initial claims for state unemployment benefits dropped 1,000 to a seasonally adjusted 209,000 for the week ended January 24th, the Labor Department said on Thursday. The prior week’s level of claims was revised by 10,000 to 210,000. While difficulties adjusting the weekly unemployment claims data for seasonal fluctuations around the year-end holiday season and turn of the year have injected volatility into the numbers, economists said there has been no material change in labor market conditions. Economists say companies are reluctant to lay off workers while assessing what they have called an ever-shifting economic landscape, mostly related to tariffs on imports.
The Federal Reserve on Wednesday voted to take a break from a recent run of interest rate cuts, as the central bank navigates questions about its independence and awaits a new leader. Meeting market expectations, the central bank’s Federal Open Market Committee voted to keep its key interest rate in a range between 3.5%-3.75%. The decision put a halt to three consecutive quarter percentage point reductions, billed as maintenance moves to guard against potential downturns in the labor market. In voting to hold the line, the committee raised its assessment of economic growth. It also eased its concerns about the labor market as compared with inflation. “Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has shown some signs of stabilization,” the post-meeting statement said. “Inflation remains somewhat elevated.”
