Home loan activity surges year over year despite holiday drop

Despite taking a dip during the holiday season, residential mortgage activity continues to remain elevated into the new year.

For the week ending Jan. 2, the number of new purchase mortgage applications tumbled by almost 33 percent compared to four weeks prior, and refinancing applications also were lower, by 37 percent, according to the latest survey from the Mortgage Bankers Association.

However, both purchase and refinance loan application volume was much higher compared to the same time last year. Refinancing activity surged by nearly 108 percent year over year, while purchase applications were up by 10 percent.

The changes in the dollar volume of applications followed the same pattern: the dollar amounts of purchase applications and refinancing applications plunged by 35 percent and 40 percent, respectively, compared to four weeks ago. But year over year, they had increased by 9 percent for purchase loans and 165 percent for refinancings, according to the MBA.

Residential loan activity got a lift in the back end of 2025, after the Federal Reserve slashed its benchmark interest rate three times — a move that boosted optimism in the economy along with helping to cut borrowing costs.

The rate for a 30-year, fixed-rate mortgage as of Jan. 2 was 6.25 percent, down by 8 basis points compared to four weeks ago and 74 basis points compared to one year ago, according to data from the MBA.

The drop in rates has attracted more homebuyers. Pending home sales increased by 3.3 percent in November compared to the month before. They were also up year over year, by 2.6 percent, according to the National Association of Realtors. The South saw the greatest uptick in pending deals, which had also climbed by 3.3 percent in the region year over year.

The Fed’s actions appear to have also helped buoy the performance of residential mortgage real estate investment trusts, too. An index tracking those firms ended 2025 with its total returns up by 16 percent.