Some prospective borrowers are stepping back as year comes to end, Fed meeting sparks mortgage uncertainty

Applications for purchases, refinances declined this week

Economists say more official data about the market is necessary for clarity. (Eric Lynch/CoStar)

By Moira Ritter

December 17, 202511:01 AM ET

A mixed picture for the mortgage market has some prospective borrowers stepping back.

The Mortgage Bankers Association on Wednesday reported a 3.8% decrease in its weekly index measuring purchase and refinance demand. That decline was driven by a 4% weekly decline in refinances and a 3% weekly decline in purchase applications.

Weekly pictures of the mortgage market tend to be finicky and highly volatile, but this week is particularly interesting because it follows a Federal Reserve meeting.

Last week, the central bank met and decided to cut its benchmark interest rate. Though that's not connected to mortgage rates, it often influences how other borrowing costs move.

Indeed, last week's meeting signaled to investors that "we are near the end of this rate-cutting cycle," in turn putting some downward pressure on mortgage applications, according to Mike Fratantoni, the MBA's chief economist. In other words, markets are preparing for fewer Fed rate cuts in the next year or two.

There's a mismatch between cost and demand

But the decline in mortgage demand comes as daily measures of those borrowing costs — also volatile — have hovered near 2025 lows since the Fed meeting.

It's a weird mismatch that some economists say can really only be resolved by forthcoming economic data and the new year. Brad Case, the chief residential economist for Homes.com, for example, said it's hard to pinpoint the exact reason for this week's decline in mortgage demand.

"Consumer expectations regarding whether mortgage rates will go up or down has been evenly divided," Case said, "so the FOMC announcement is unlikely to have been a surprise or to have provided much more clarity."

That said, this week brings new official data about the economy. On Tuesday, the November job's report came out — the first full release of government data since before the federal shutdown. And on Thursday, data about inflation will be released.

Taken together, those two reports have the potential to create drastic change in the mortgage market, so it could be that some borrowers are waiting to see what happens before making any moves.

At the same time, there are also seasonal patterns at play. With only two weeks left in the year, the market is entering a historically slow period.

"Purchase application volume typically drops off quickly at the end of the year, and this shifts the mix of the business," Fratantoni explained.

Even so, both purchase and refinance demand are far outpacing where they stood a year ago, a signal that growth may be on the horizon for the mortgage market in 2026. Refinancing demand was 86% higher than the same week a year ago, and purchase demand saw a 13% increase.

WriterMoira Ritter

Moira Ritter is an award-winning staff writer for Homes.com, covering the California housing market with a passion for finding ways to connect real estate with readers' everyday lives. She earned recognition from the National Association of Real Estate Editors for her reporting on Hurricane Helene's aftermath in North Carolina.

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