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- Mortgage market update: Mortgage purchase and refi applications improve but remain historically soft
Mortgage market update: Mortgage purchase and refi applications improve but remain historically soft
Mortgage purchase applications are starting 2026 in ‘historically soft’ territory (bottom 25th percentile). However, they’re approaching the bottom threshold for ‘historically normal’ purchase apps levels (25th–75th percentile).
Lance Lambert
January 17, 2026
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Let’s talk mortgage apps
After plunging in 2022 during the sharpest mortgage-rate shock in four decades and the end of the Pandemic Housing Boom, mortgage purchase applications are inching up again—albeit slowly.
The Mortgage Purchase Application Index at the second week of January, by year:
January 2018 —> 249.2
January 2019 —> 278.5
January 2020 —> 303.9
January 2021 —> 338.9
January 2022 —> 305.7
January 2023 —> 201.0
January 2024 —> 162.2
January 2025 —> 162.0
January 2026 —> 184.6
Zoomed out, mortgage purchase applications are starting 2026 in ‘historically soft’ territory (bottom 25th percentile). However, they’re now approaching the bottom threshold (188.9) for ‘historically normal’ purchase apps levels (25th–75th percentile).
Historically, mortgage purchase applications have been a leading indicator of U.S. existing-home sales. Current purchase application data suggest sales could rise a little in 2026 relative to 2025. But even with a small uptick this year, resale turnover would still remain at constrained levels.
After plunging in 2022 during the sharpest mortgage-rate shock in four decades and the end of the Pandemic Housing Boom, mortgage refi applications are also on the mend—albeit at a slow pace.
The Mortgage Refinance Index at the second week of January, by year:
January 2018 —> 1,314
January 2019 —> 1,172
January 2020 —> 2,445
January 2021 —> 4,706
January 2022 —> 2,276
January 2023 —> 427
January 2024 —> 471
January 2025 —> 576
January 2026 —> 1,313
Zoomed out, mortgage refi applications are starting 2026 in ‘historically soft’ territory (bottom 25th percentile). However, they’re now getting a little closer to the bottom threshold (2,884) for ‘historically normal’ refi levels (25th–75th percentile).
I should note that rejection rates have risen a little for mortgage purchase applications and even more so for mortgage refinance applications over the past year, according to the New York Fed. To understand if it might be impacting the aggregate data a little, I reached out to the Mortgage Bankers Association about this a few months back; however, I haven’t yet received a response.
One thing that’s helped on the application front: Mortgage spread compression.
Back in late October 2023, the average 30-year fixed mortgage rate, as tracked weekly by Freddie Mac, hit its cycle high of 7.79%. At that time, the 10-year Treasury yield stood at 4.86%. Meaning, in late October 2023, the spread between the average 30-year fixed rate and the 10-year Treasury yield was a staggering 2.93 percentage points (293 bps)—well above the long-run average mortgage spread of 1.77 percentage points (177 bps) since 1972.
Since then, the mortgage spread has gradually been compressing. As of this week, the spread sits at 1.89 percentage points (189 bps). Indeed, the average 30-year fixed mortgage rate (6.06% this week) is down 1.73 percentage points (173 bps) from its cycle high. Of that 1.73-percentage-point decline, roughly 1.04 percentage points (104bps) has come from spread compression, as the 10-year Treasury yield (4.17% this week) has fallen only 0.69 percentage points (69 bps) over the same period.
When quantitative tightening began in spring 2022, the Fed stopped purchasing mortgage-backed securities (MBS) and allowed MBS to slowly roll off its balance sheet without replacement. The absence of an immediate replacement MBS buyer contributed—along with other factors like greater prepayment risk—to the widening in mortgage spreads. Over time, however, other buyers have stepped in to absorb MBS supply, helping to gradually compress spreads.
Big picture:
Ever since mortgage rates spiked in 2022, the mortgage industry has been dealing with suppressed levels of resale purchase and refinance activity. Given still-strained housing affordability and high switching costs, 2026 is likely to be another year of historically low resale turnover. That said, the data continue to suggest that U.S. existing home sales are trying to move from trough toward recovery—albeit a very slow, grinding recovery.
On the refinance side, each time mortgage rates slip, we see an uptick in borrowers from recent higher-rate vintages (late 2022–early 2025) taking the opportunity to capture some monthly payment relief. However, we’re still not in an environment that can sustain a larger and more prolonged upswing in refis: 68.6% of U.S. mortgage borrowers have an interest rate under 5.0%, according to FHFA.
Housing news this week:
—> On January 5, billionaire Brad Jacobs announced that Apollo led a $1.2 billion investment into QXO—the building materials juggernaut he’s building. On January 12 (Monday), QXO announced that additional investment figure had risen to $3 billion. QXO says it’s “targeting $50 billion in annual revenues within the next decade through accretive acquisitions and organic growth.”
—> On Friday, Invitation Homes—a giant single-family landlord that wholly owns 85,905 single-family rentals—announced that it had acquired ResiBuilt, a Southeast-based build-to-rent developer. ResiBuilt has completed 4,200 homes since its founding in 2018. The acquisition came with an $89 million price tag.
—> Last week, Sen. Josh Hawley (R-Mo.) tweeted that he supports easing restrictions to allow buyers to tap their 401(k) and other retirement accounts—without penalties or taxes—to help purchase a home. Politico reports that Trump is drafting an executive order on this front, with a potential announcement coming at Davos next week. As I tweeted heading into January, sources told ResiClub that the Trump administration would announce its housing plan in January. The first was a proposed ban on additional institutional homebuying. Then, the administration announced that Fannie Mae and Freddie Mac would increase their retained mortgage bond holdings by an additional $200 billion in an effort to put additional downward pressure on mortgage rates.
U.S. existing home sales totaled 4.06 million in calendar year 2025.
That's tied for the lowest year since 1995—and essentially flat from 2023 (4.09M) and 2024 (4.06M).
On a seasonally adjusted annualized basis, U.S. existing home sales are now running at 4.35M... meaning, if we maintain the current rate of existing home sales—and seasonality acts as expected—we'd see slightly more existing home sales in 2026 than we saw in 2025.
