By Shaina Mishkin

If there's one bright side of last week's stock market upheaval, it's the resulting decline in mortgage rates. Prospective buyers took advantage of the drop.

An early-stage sign of home purchase demand increased to its highest level in more than a year last week, according to Mortgage Bankers Association home purchase loan application data. Applications for a mortgage to purchase a home increased a seasonally adjusted 9% from the week prior to the strongest pace since January 2024, the trade group said Wednesday.

It's not that home buyers know something about the tariff news that caused the market sell-off that stock investors don't. Rather, a drop in the 10-year Treasury yield carried over to mortgage rates, which dropped as low as 6.6%, according to Mortgage News Daily -- its lowest level since October.

"Both homebuyers and refinance borrowers were quick to take advantage of this dip in rates," Joel Kan, the Mortgage Bankers Association's deputy chief economist, said in a statement.

The strong increase is a sign that buyers are perhaps more eager to take advantage of lower financing costs than they are concerned about macroeconomic uncertainty. Existing-home sales, the largest slice of the home purchase market, have been particularly challenged for the past two years as costs rose steeply, likely resulting in a number of would-be buyers waiting for an opportunity. Barron's wrote last week that such buyers without much exposure to the stock market could take advantage of the drop in rates.

"Many of our clients have been planning for months in advance to buy [or] sell," says Massachusetts-based Compass agent Dana Bull, who notes that April and May are particularly busy months in the market around Boston. "Interest rates are at their lowest point since the start of the year so that's definitely keeping things moving."

If the increase in home purchase loan applications keeps going, it will be a positive sign for the national housing market -- but there are two reasons to think that it might stop.

The most immediate: the 30-year fixed mortgage rate measured by Mortgage News Daily has since increased significantly , to 6.85% as of Tuesday, its highest level since late February, as markets swung this week. If those rates hold, the gain could snuff out a national buyer rebound before it starts.

There are also the broader economic concerns that dragged 10-year Treasury rates -- and, with it, mortgage rates -- lower to begin with. Economists are increasingly concerned about the odds of a recession, Barron's reported recently .

And if tariffs result in the recession that some economists are warning about, buyers could postpone purchases despite drops in mortgage rates -- particularly if unemployment rises. "All of this is a very significant negative for housing," Mark Zandi, Moody's Analytics' chief economist, told Barron's.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 09, 2025 07:00 ET (11:00 GMT)

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