Insights on Mortgage Purchase Application Data
Analysis of the past three years reveals that when mortgage rates drop below 6.64% and approach 6%, there is a noticeable improvement in purchase application data, particularly on a week-to-week basis. This year, we have successfully maintained rates below 6.64% for 18 consecutive weeks, resulting in the most successful 18-week period of the year. Here is a summary of the data from the last 18 weeks:
- 11 weeks with positive week-to-week growth
- 7 weeks with negative week-to-week growth
- 18 weeks with double-digit year-over-year growth
The chart below illustrates that we are currently experiencing a three-year high in mortgage purchase application data as of December 2025.
Examining the data for the entire year, it is evident that earlier in the year, when mortgage rates were above 6.64%, the week-to-week data was inconsistent. However, with rates now below 6.64% and approaching 6%, there has been a notable improvement in the data:
- 23 positive readings
- 18 negative readings
- 6 flat prints
- 44 consecutive weeks of positive year-over-year data
- 31 consecutive weeks of double-digit year-over-year growth
This positive trend is also reflected in our total pending home sales data, which has reached a multi-year high in the most recent week.
Analysis of Mortgage Rates, Spreads, and the 10-Year Yield
In the 2025 forecast, it was predicted that mortgage rates would range between 5.75% and 7.25%, while the 10-year yield would fluctuate between 3.80% and 4.70%. Mortgage spreads have played a crucial role this year due to the 10-year yield remaining above 3.60%. Despite challenges in staying below 4%, mortgage rates are currently hovering around 6%.
Impact of Mortgage Spreads
The improvement in mortgage spreads for 2025, ranging from 0.27% to 0.41%, has been a significant achievement. Historically, mortgage spreads have typically ranged between 1.60% and 1.80%. If spreads were at peak levels from 2023, mortgage rates would be substantially higher, while returning to normal ranges could result in lower mortgage rates.
Positive Trends in Inventory Growth and Price Stability
In addition to favorable spread news, there has been year-over-year growth in active housing inventory and a slowdown in price growth in 2025. Despite the seasonal decline in inventory, the year has seen a more balanced housing inventory situation, with a significant reduction in inventory growth percentage. This has translated to better deals for buyers this year.
As inventory growth remains positive, the percentage of price cuts has also increased, indicating a more buyer-friendly market compared to the previous year.
Looking Ahead: Federal Reserve Meeting
The upcoming week is packed with economic data releases, with the highlight being the Federal Reserve meeting on Wednesday. There are expectations of a rate cut, but Federal Reserve Chair Jerome Powell is likely to maintain a hawkish stance, setting the stage for a more cautious approach to future rate cuts in 2026.
With the combination of rate cuts initiated in 2024 and improved mortgage spreads, the mortgage market in 2026 holds promising potential to sustain rates around 6% for an extended period, marking a positive shift from recent years.