Understanding the Latest Trends in Mortgage Applications for January 2025

Last week, the Mortgage Bankers Association (MBA) did not release its weekly application figures, so this week’s report had to account for any market shifts that occurred in the meantime. By December 18, the impact of the rate increase, prompted by the Federal Reserve’s announcement, was already evident. Had the MBA updated the index last week, it likely would have shown a decline. Currently, the figures reveal that refinancing demand has dropped to its lowest point since early 2024. This data accounts for seasonal adjustments, indicating that the decline in applications is not merely a result of the holiday season, but a real reaction to the moderate yet swift rate increase in the latter half of December. On a more positive note, the rate surge stabilized last week, not reaching new peaks. While refinancing demand shows volatility, the overall activity remains low when viewed in a broader historical context. This situation could change with either the passage of time or a substantial rate decrease, beyond what occurred in 2024. Meanwhile, purchase demand continues steadily, having fallen slightly in the past fortnight, yet this reduction is smaller within the existing range, which has remained narrow and stable since reaching a low over a year ago.

Navigating January 2025: Key Insights on Mortgage Backed Securities Markets

This week’s only major economic announcement came from the ISM Manufacturing report. Although it didn’t demonstrate significant strength, it wasn’t particularly weak either. Crucially, the results surpassed both last month’s figures and the median forecast, including both the overall PMI and the “prices paid” section. This outcome provides enough stability to keep bonds from rallying significantly. Following the release, trading levels shifted from slightly stronger to slightly weaker.

Navigating the New Year: Key Takeaways from the Latest Mortgage Market Trends

A Quiet Beginning to 2025

The bond market started off on a positive note but lost some ground following the release of the Jobless Claims data. The morning saw some selling pressure which eased off after bonds dipped into negative territory, with conditions stabilizing to slightly stronger levels by the afternoon. Despite a notable amount of volatility, as seen in the previous session, the scale of the changes has been relatively minor. Overall, the beginning of the new year has been calm, typical of the low-key trading period during the winter holidays. It’s important to note that current trading levels remain consistent with the day following the most recent Federal Reserve announcement. Moreover, yields are slightly lower compared to the end of last week.

Economic Data and Events

Jobless Claims: 211,000 compared to 222,000 forecast, and 219,000 previously

S&P Manufacturing PMI: 49.4 versus 48.3 forecast, and 49.7 previously

Market Movement Highlights

09:30 AM: Gains from overnight erased Tuesday’s decline, but some losses have since occurred. Mortgage-backed securities (MBS) up by an eighth, and the 10-year Treasury down 2.5 basis points at 4.547%.

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Navigating the New Year: Insights into January 2025 Mortgage Rate Trends

The last significant shift in mortgage rates occurred around the Federal Reserve’s rate cut on December 18th. At that time, rates increased sharply, illustrating that a rate cut can lead to various outcomes. By the end of the week, many lenders settled at around 7.125% for top tier conventional 30-year fixed rates. Since then, there has been a slight drop to about 7.07%, with minimal changes. This stability often characterizes the winter holiday period due to shifts in bond market activity and the nature of available economic data. The Federal Reserve’s actions were the most recent major influence, and the next big indicator will arrive with the upcoming jobs report next Friday. Until then, while moderate rate changes could occur, any substantial shifts would likely require unexpected economic data.

Navigating the 2025 Mortgage Market: Key Insights and Trends for Industry Professionals

Welcome to 2025, as we bid farewell to 2024. It’s astounding to think that it’s been 50 years since iconic films like Jaws and The Godfather Part II hit the big screen, and a half-century since “Kung Fu Fighting” first filled the airwaves. Despite the new year, the challenges faced by bond markets, lenders, and vendors remain familiar. Some lenders are currently managing to earn 25 basis points or more on production without any servicing. Meanwhile, others are able to scrape by with gains due to their servicing but face losses otherwise. It’s worth considering whether your company would remain profitable in the absence of servicing. Lenders have found that true profitability without servicing requires holding sales and branches genuinely accountable, emphasizing concrete actions over mere words. Engaging in unprofitable endeavors just to outlast competition might not be the wisest strategy. For more insights, today’s podcast is available and this week’s sponsor is The BIG Point of Sale. They offer a versatile, easy-to-install point of sale solution that streamlines consumer workflows, with web-based portals enabling seamless collaboration between consumers, loan originators, and back-office teams. You can listen to an interview with Matthew VanFossen from The Big POS, discussing mortgage technology,

Navigating the 2025 Mortgage Market: Key Trends and Insights for the New Year

Overnight, bonds showed consistent strength in Asian and European markets. In response, 10-year Treasury yields and Mortgage-Backed Securities (MBS) quickly recovered the losses experienced on Tuesday within the first half-hour of U.S. market activity. This coincided with the release of Jobless Claims data, which had a minimal impact on the trajectory.

Navigating Year-End Mortgage Trends: Key Takeaways from December 2024 MBS Recap

End-of-Year Trading: A Brief Fluctuation

Bonds initially showed strength but quickly faltered without clear reason beginning around 10:30 AM ET. This behavior exemplifies the unpredictable volatility typical of year-end trading, unaffected by news or data. With bonds now closed for the day, month, and year, trading will resume on Thursday. Wishing everyone a Happy New Year!

Economic Data and Events

Chicago Purchasing Managers Index (PMI)

Recorded at 36.9 compared to the forecast of 42.5, previously at 40.2

Market Movement Overview

09:31 AM: Mortgage-backed securities (MBS) decreased by an eighth point, and the 10-year yield dropped by 2 basis points to 4.52.

12:22 PM: Month-end trading exerted pressure, with MBS down a quarter point and the 10-year yield rising by 4.7 basis points to 4.586.

02:18 PM: Trading closed just above the day’s lowest levels, with MBS down 6 ticks (0.19) and the 10-year yield up 3.3 basis points to 4.572.

Key Insights and Trends in the Mortgage Rate Market for Year-End 2024

During major holidays, markets generally experience a full-day closure and an “early close” on a day nearby. This impacts mortgage rates because lenders base their offers on bond market trading levels. These lenders require a certain level of market activity to set competitive rates. However, early close days typically see reduced market activity, resulting in fewer rate adjustments by lenders. In this scenario, that was beneficial as it minimized negative changes. Today, for example, most lenders started with rates similar to the previous day, even though the bond market worsened later. Normally, this would lead to lenders increasing their rates, but only a few made adjustments. This could mean rates could be higher on Thursday unless the bond market opens differently. Regardless, the last or first trading day of the year can experience unusual volatility or momentum for reasons outside of typical economic influences, like data and news.

Navigating 2024: Insights and Strategies for Mortgage Professionals

Four years ago, many were captivated by shows like “Tiger King” and “My Octopus Teacher”, but there’s something else these states—Alabama, California, Colorado, Connecticut, Florida, Georgia, Maryland, Massachusetts, New Jersey, New York, New Mexico, North Carolina, Rhode Island, South Carolina, Tennessee, Vermont, and Virginia—share: the legality of first-cousin marriages. This little-known fact is of interest alongside demographic trends, which greatly influence lenders’ strategies. By 2024, the Baby Boomer generation totals around 65 million, making up 20% of the U.S. population and 36% of homeowner households. Millennials, numbering about 83 million and born between 1982 and 2000, are a major demographic as well. Since the pandemic began, U.S. household net worth has surged by $44 trillion, equating to $332,000 more per household, with Boomers’ wealth growing by $19 trillion or $486,000 each, largely due to rising home values. This surge hasn’t evaded reverse mortgage companies, who are keenly aware of these demographic shifts and financial statistics.

Additionally, a podcast is available, sponsored by The BIG Point of Sale, which

Navigating Year-End Mortgage Market Shifts: What to Expect in 2025

The morning opens with mortgage-backed securities (MBS) showing a slight dip, while Treasury securities exhibit modest gains. Though the difference isn’t notably significant to warrant a detailed explanation, a few factors come into play. Notably, there were trades made after market hours for MBS last night, which temporarily inflated the ‘previous close’ figures. A quick glance at the charts reveals that MBS prices are marginally better than any point observed yesterday.

In terms of rationalizing any underperformance, it could be as simple as MBS’s relative strong performance last week. Treasuries were clearly accommodating upcoming auctions and have since had an opportunity to stabilize.

Finally, being the last day of the year, Treasuries might be receiving a boost from end-of-month, year, or quarter positioning, though this explanation might be overstating the influence in this particular case.