Seasonally adjusted mortgage application activity declined 3.8% last week, according to MBA’s Weekly Mortgage Applications Survey for the week ending December 12. Unadjusted applications fell 5% from the prior week, reflecting a typical seasonal slowdown as the year draws to a close. The Refinance Index slipped 4% from the previous week but remains 86% higher than the same week one year ago, underscoring continued refinance interest as rates remain rangebound. Purchase activity also softened, with the seasonally adjusted Purchase Index down 3% from the prior week. On an unadjusted basis, purchase applications declined 7% week-over-week but are still running 13% above last year’s pace. “Mortgage rates inched up last week following the FOMC meeting, as investors interpreted the comments to signal that we are near the end of this rate cutting cycle. As a result, mortgage applications declined slightly,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Purchase application volume typically drops off quickly at the end of the year, and this shifts the mix of the business, with the refinance share reaching 59 percent last week, the highest level since September. However, refinance activity has remained mostly the same for the past month as rates continue to hold at around the same narrow range.” The refinance share of applications increased to 59.0% from 58.2% the previous week. ARM share rose to 7.2%. FHA share edged lower to 19.5%, while VA share increased to 16.6%. USDA share increased to 0.4%.

The option for holders of older government-sponsored enterprise bonds that predated the move to uniform mortgage-backed securities now has a deadline.

A coalition of mortgagees said the zombie seconds law negatively impacts 1.2 million junior liens statewide, despite just over 500 potential “zombie” loans.

The Dallas bank turned down another offer because it thought it could get a higher price from Fifth Third, and also could ink an agreement faster, according to Comerica’s latest regulatory filing.

Congress has passed a bill giving taxpayers who have been affected by natural disasters some extra time to file a claim for a tax credit or refund.

The Federal Reserve said in a statement that its “understanding of innovation products and services have evolved” since the initial guidance was published in 2023.

Limited Follow-Through After Shockingly Big Miss

If you told the average trader that today’s core CPI would come in at 2.6% vs 3.0% year over year, they would have expected a much bigger reaction than we saw today. Ironically, the size of the miss may be one of those reasons. It’s so far outside the realm of expected possibilities that traders immediately assumed the presence of legitimate issues with November’s data collection. Nonetheless, it was worth a moderate extension of the overnight rally.

Econ Data / Events

Continued Claims (Dec)/06

1,897K vs 1930K f’cast, 1838K prev

Jobless Claims (Dec)/13

224K vs 225K f’cast, 236K prev

Philly Fed Business Index (Dec)

-10.2 vs 3 f’cast, -1.7 prev

Philly Fed Prices Paid (Dec)

43.60 vs — f’cast, 56.10 prev

y/y CORE CPI (Nov)

2.6% vs 3% f’cast, 3.0% prev

y/y Headline CPI (Nov)

2.7% vs 3.1% f’cast, 3.0% prev

Market Movement Recap

08:47 AM Rallying after CPI data. MBS up a quarter point and 10yr down 4.4bps at 4.115

12:18 PM Off best levels. MBS still up 5 ticks (.16) and 10yr down 3.1bps at 4.127

02:56 PM MBS up 7 ticks (.22) and 10yr down 4.2bps at 4.117

Officially, there were 2 days at the end of November where the average lender’s 30yr fixed rates were just a hair lower (0.02% difference).  Otherwise, today’s rates would be the lowest since late October. The improvement follows this morning’s release of November’s Consumer Price Index (CPI). Inflation was so far below expectations that it raised new questions about just how much the government shutdown impacted data collection. The market still treated it as good news for rates, but most of the improvement was already in place before the data came out. CPI marked the last of 2025’s top tier economic reports when it comes to potential impacts on rates. This doesn’t mean rates won’t move between now and January–only that they’re far less likely to make any big changes based on economic reports.

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Great news for bonds on the inflation front this morning: Core annual inflation came in at 2.6% compared to a 3.0% forecast and 3.0% last time.  It’s the lowest reading of the cycle and the first attempt to break below the stagnant sideways/elevated levels that have prevented more aggressive Fed rate cuts. Despite those facts, the bond market is only rallying moderately (but certainly rallying). Traders could be skeptical about the thoroughness of post-shutdown data collection, or this could foreshadow year-end bearish biases. Whatever the case, the data itself was better for bonds than anyone could have hoped for (and better than any economist predicted).  NOTE: there is no month-over-month data due to the non-existence of October CPI.