Mortgage rates decreased by eight basis points last week according to the Freddie Mac Primary Mortgage Market Survey released on February 18th. After three weeks in a row of decreasing rates, we are now one basis point away from the important psychological barrier of rates breaking below 6%. And with rates at their lowest level since September of 2022, this lower rate environment is not only improving affordability for prospective homebuyers but also strengthening the financial position of existing homeowners. Over the past year, refinance application activity has more than doubled, enabling many recent buyers to reduce their annual mortgage payments by thousands of dollars.
Mortgage applications increased 2.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 13th. “Mortgage applications rose last week as the lowest rates in four weeks helped to revive some refinance activity. Treasury yields ended the week lower as weaker data on retail sales and home sales outweighed better-than-expected readings on the job market for January,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Mortgage rates moved lower and all other loan types in the survey also declined. Refinance applications increased across all loan types, marking the strongest week for refinancing since mid-January.” Added Kan, “Borrowers are increasingly utilizing FHA loans as affordability challenges remain, despite recent improvements. Similarly, the ARM share increased to a seven-week high with ARM rates almost a percentage point lower than fixed rates.”
The cost of goods and services rose at a slower annual rate than expected in January, providing hope that the nagging U.S. inflation problem could be starting to ease. The consumer price index for January accelerated 2.4% from the same time a year ago, down 0.3 percentage point from the prior month, the Bureau of Labor Statistics reported last Friday. That pulled the inflation rate down to where it was the month after President Donald Trump in April 2025 announced aggressive tariffs on U.S. imports. Excluding food and energy, the core CPI was up 2.5%, the lowest level since April 2021. “This is great news on inflation,” said Heather Long, chief economist at Navy Federal Credit Union. “Inflation fell to the lowest level since May and key items such as food, gas and rent are cooling off. This will provide much needed relief for middle class and moderate-income families.”
Divided Federal Reserve officials at their January meeting indicated that further interest rate cuts should be paused for now and could resume later in the year only if inflation cooperates. While the decision to hold the central bank’s benchmark rate steady mostly was met with approval, the path ahead appeared less certain, with members conflicted between fighting inflation and supporting the labor market, according to minutes released Wednesday from the Jan. 27-28 Federal Open Market Committee meeting. “In considering the outlook for monetary policy, several participants commented that further downward adjustments to the target range for the federal funds rate would likely be appropriate if inflation were to decline in line with their expectations,” the meeting summary said. However, meeting participants disagreed on where policy should head, with officials debating over whether the focus should be more on fighting inflation or supporting the labor market.
