A prospective buyer and a real estate agent look through a window in a bedroom during an open house at a home in Seattle, Washington, US, on Sunday, Jan. 18, 2026.
David Ryder | Bloomberg | Getty Images
The spring housing market is stirring, but its rhythm is being dictated by two powerful, and often opposing, forces: lingering geopolitical uncertainty and a persistent inventory shortage. This tension was on full display last week, as data revealed a split in mortgage demand even as total application volume inched higher.
Mortgage Rates Tick Up Amid Market Volatility
According to the Mortgage Bankers Association’s (MBA) seasonally adjusted index, total mortgage application volume rose 3.2% last week. This modest gain, however, masks a significant divergence between borrowers seeking to refinance and those looking to purchase a home.
The average contract interest rate for a 30-year fixed-rate mortgage with a conforming loan balance (up to $832,750) increased to 6.19% from 6.09% the prior week, with points rising to 0.58 from 0.52. This movement aligns with broader financial market volatility.
“Financial markets were volatile last week amid the ongoing turmoil in the Middle East,” explained Mike Fratantoni, Chief Economist at the MBA. “Borrowers in recent weeks were able to get 30-year conforming rates below 6 percent, but with the current volatility, longer-term rates have moved up.”
A Tale of Two Mortgage Demands
The week’s data tells a clear story:
- Refinancing: Applications for refinance loans rose a mere 0.5% from the previous week. While this represents an 81% increase compared to the same week one year ago—when rates were significantly higher—the recent flatlining suggests the brief window of rates below 6% has closed for many existing homeowners.
- Home Purchasing: The seasonally adjusted purchase index surged 7.8% for the week and is now 11% higher than a year ago. Fratantoni noted a specific strength in government-backed FHA loans, which saw activity jump over 11%. “More inventory on the market is supporting more transactions,” he stated, pointing to a key catalyst for buyer activity.
Inventory Improves, But Remains Tight
While the MBA cites more inventory as a supporting factor, the National Association of Realtors (NAR) report on February closed sales underscores that the market is still severely constrained. The report showed a mere 3.8-month supply of homes for sale. For context, a balanced market typically requires a 6-month supply. This scarcity continues to pressure prices and influences buyer financing strategies.
Borrowers Adjust Strategies Amid High Costs
Faced with elevated home prices and interest rates, consumers are exploring alternative loan products. The share of applications for adjustable-rate mortgages (ARMs) climbed last week to nearly 9% of total volume. ARMs often offer lower initial rates than fixed-rate loans but carry the risk of future rate adjustments, making them a tool for some buyers to manage monthly payments in the short term.
As one market analyst noted, the search for affordability is driving this nuanced shift in loan preference, even as overall purchase demand grows.
Looking Ahead: The Inflation Watch Begins
The mortgage rate landscape remains fragile. A separate survey from Mortgage News Daily indicated that rates moved slightly lower to start the current week. However, bond yields—which directly influence mortgage rates—are seesawing on news from the Trump administration regarding the war’s trajectory. The next major catalyst arrives Wednesday with the release of the Consumer Price Index (CPI), a key monthly inflation gauge. Any surprise in this data could trigger additional volatility in mortgage rates for the weeks to come.
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