Mortgage demand keeps on falling. Mortgage applications dropped 5.2% for the week ending May 31 compared to the prior week, according to the Mortgage Bankers Association (MBA), results that include an adjustment for the Memorial Day holiday.

On an unadjusted basis, the MBA’s market composite index decreased 16% compared with the prior week as mortgage rates remain firmly above 7% and home prices continue to remain near record levels.

“Mortgage rates moved slightly higher last week, with the 30-year conforming rate reaching 7.07 percent — its highest level since early May — despite incoming data indicating somewhat slower economic growth,” Mike Fratantoni, the MBA’s chief economist, said in a statement.

“After adjusting for the Memorial Day holiday, both purchase and refinance application volumes were down, with purchase activity specifically 13% below last year’s level.”

Fratantoni noted that government purchase volume was down less, aided by growth in U.S. Department of Veterans Affairs (VA) loan applications. “The market is relying on first-time homebuyer demand, and many first-time buyers do use government lending programs,” he said.

The refinance share of mortgage activity decreased to 31.1% of total applications, down from 31.3% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.7% of total applications.

The Federal Housing Administration (FHA) share of total applications increased to 13.2%, up from 12.7% the week prior. And the VA share of total applications increased from 12% to 12.1% during the week.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased from 7.05% to 7.07%, with points increasing from 0.63 to 0.65 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. 

Even at the highest demand levels in 2024, purchase mortgage applications are about 45% lower compared to the same weeks in 2018 and 2019.