Mortgage Rates Drive April 2025 Slowdown as Purchases and Refinances Diverge

Rising Mortgage Rates Stir Up April’s Housing Market

April 2025 tossed a curveball at homebuyers and homeowners alike. After months of nervous watching, the 30-year fixed mortgage rates steadied at an average of 6.89%. But this calm came only after a spike earlier in the month, rattling both those looking to buy and those desperate to refinance. While rates finally stopped climbing by the end of the month, that mid-April jump triggered a sharp 12.7% plunge in mortgage application volume in just one week. Refinance activity took the hardest hit, tumbling 20% in a single week and now sitting 42% lower than it did before the pandemic rocked the market.

Homebuyers felt the pressure too. The Mortgage Bankers Association (MBA) reported that overall new purchase applications slipped 4% week-over-week by late April, with conventional and VA loan requests dropping even further—6% for conventional and 4% for VA loans. Yet not every corner of the market reacted the same way. Loans backed by the FHA (Federal Housing Administration), a popular choice for first-timers with lower down payments, held up pretty well with only minor decreases. It turns out that even as seasoned repeat buyers sat on the sidelines, first-timers kept things from completely stalling.

New Construction Shines Despite Uneasy Market

Though the market feels jittery, one surprising trend stood out in April—new single-family home sales were booming. Builders moved an estimated 718,000 units at a seasonally adjusted pace, the fastest rate since October 2024. What explains the jump? The inventory of unsold homes kept rising, meaning less frenzied competition and slightly more choices for buyers. For those able to stomach the higher monthly payments, it was finally possible to get into a new house without the bidding wars of the past two years.

The broader trends tell a more cautious story. While applications for new homes shot up 5.3% year-over-year—setting a record since 2012—the monthly numbers weren’t as rosy. Month-over-month, there was a slight decline in overall purchase activity, which suggests that high borrowing costs and shaky economic vibes are still keeping plenty of would-be buyers on the sidelines. And it’s not just higher rates slowing people down. Job market worries and inflation have introduced a new layer of hesitation, especially for those thinking about stretching their budgets for a home.

There’s a slowdown on the price front too. Home price increases cooled to 2.7% annually back in February, with the pace dipping even further in March. Real estate pros say the cooling trend looks set to last, even as Fannie Mae forecasts a modest 4.1% bump in home prices throughout the rest of 2025. At the same time, Fannie expects mortgage rates to settle closer to 6.2% by year’s end, which might help the market find its footing again.

In this new normal, it’s all about resilience. The FHA stays busy with first-time buyers who are undeterred by higher rates and are eager to grab available houses. Refinancers, meanwhile, have faded fast, knowing there’s little incentive unless rates dip much lower. If you’re in the market, strategy matters more than ever—this housing rollercoaster isn’t slowing down anytime soon.