Mortgage Rates Drop as Stocks Plummet Amid Economic Uncertainty

PASADENA, California — Mortgage rates recently fell to their lowest since October 2024, spurring a surge in applications amid a tumultuous economic landscape marked by a significant decline in stock market performance.

According to the Mortgage Bankers Association‘s seasonally adjusted index, total mortgage applications rose 11.2% week-over-week following a substantial jump in the previous week. The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.67% from 6.73%, although points increased to 0.63 from 0.60 for loans with a 20% down payment.

“Mortgage rates declined for the sixth consecutive week, with the 30-year fixed rate dropping to 6.67%, the lowest level since October 2024,” said Joel Kan, an economist with the MBA, in a statement. The rate remains 17 basis points lower than it was a year ago.

Refinance applications rose 16% from the previous week, with levels 90% higher than the same week last year, as many homeowners who purchased their properties during periods of higher rates are considering refinancing. The strong percentage increases stem from a relatively low volume of applications overall.

Applications for mortgage purchases increased by 7%, standing 4% higher compared to the same time last year. The FHA mortgage rate dropped to 6.34%, which likely contributed to an 11% increase in government purchase applications.

The average loan size for purchases hit $460,800, the highest recorded in the MBA’s survey dating back to 1990, indicating a potential shift in purchasing power.

Following the mortgage rate trends, the stock market saw substantial declines. Major stock indices, including the tech-heavy Nasdaq composite, fell 4% on Monday, marking the largest one-day drop since September 2022. The S&P 500 and Dow Jones Industrial Average also experienced significant losses, closing at their lowest levels since last September.

Investor concerns about potential tariffs implemented by the Trump administration have contributed to this volatility. “A series of economic policies from President Trump, including proposed tariffs, has heightened uncertainty,” observed market analysts.

In comments to Fox Business, Trump acknowledged the market’s negative response to tariffs and stressed the necessity of building a strong economy, stating, “You can’t really watch the stock market.” This sentiment adds to investor unease regarding potential economic disruptions.

The yield on 10-year Treasurys fell to 4.22% as concerns about economic stability continue to grow. In parallel, high-profile tech stocks suffered declines across the board, with shares of Tesla plummeting more than 15% as part of the broader sell-off.

Meanwhile, analysts are keeping a close watch on economic indicators, particularly the upcoming monthly consumer price index release, as it may influence mortgage rates moving forward. Despite recent volatility, the ongoing homebuying season is expected to demonstrate increased activity across various loan categories.