Mortgage rates decreased by another three basis points last week according to the Freddie Mac Primary Mortgage Market Survey released on February 18th. That is a total of 13 basis points over the past three weeks. However, more importantly, for the first time in three and a half years, the 30-year fixed rate mortgage dropped below the important 6% psychological barrier. With rates now in the high five percent range, lower rates, combined with the improving availability of homes for sale, is meaningful and will drive more potential buyers into the market for spring homebuying season.
Mortgage applications increased 0.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending February 20th. “Mortgage rates followed Treasury yields lower last week, with the 30-year fixed rate declining to its lowest level since September 2022. The decrease in rates was enough to drive a 5 percent increase in conventional refinance applications and a 26 percent increase in VA refinances,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications were down over the week but were 12 percent higher than a year ago, as the combination of lower rates and improving affordability conditions continue to support stronger demand than last year. The ARM share stayed above 8 percent, as ARM rates remained more than 80 basis points below conforming fixed rates. This is giving payment-sensitive borrowers or those seeking larger loans an incentive to choose this product offering.”
New-home sales jumped in November before retreating slightly in December to finish 2025 with an estimated 679,000 new homes sold, 1.1% fewer than in 2024. The momentum gained at the end of an otherwise slow year is an encouraging sign for new home sales in 2026, as buyers are responding to lower mortgage rates and deciding to pull the trigger on newly built homes. The seasonally adjusted annual rate of sales in December 2025 was 3.8% higher than the pace last December, which combined with a lower number of new homes for sale (down 3.5% year over year) to drive down the months of supply from 8.2 in December 2024 to 7.6 this December. Builders slowed their new construction activity in 2025, and this uptick in demand during a period of slower supply growth has moved the new-home segment from a buyer’s market territory into balance. It’s clear that homebuyers in both the new and existing home segments responded positively to the decline in mortgage rates at the end of 2025.
The number of Americans filing new applications for jobless benefits increased slightly last week and the unemployment rate appeared to hold steady in February amid a stable labor market. The weekly jobless claims report from the Labor Department on Thursday suggested the labor market remained in a “low-hire, low-fire” state, and supported economists’ expectations that the Federal Reserve would not cut interest rates before Fed Chair Jerome Powell’s term ends in May. The labor market is regaining its footing after hitting a soft patch last year amid uncertainty economists attributed to President Donald Trump’s broad tariffs. “The data show no sign of the layoffs we would expect in a weakening labor market during the early days of a hypothetical recession,” said Carl Weinberg, chief economist at High Frequency Economics. “That will jolly up traders who believe the Fed will not cut rates anytime soon, given a steady labor market and inflation above target.”
