WASHINGTON—Mortgage application volume declined sharply last week despite the first decrease in mortgage interest rates in more than two months, as elevated borrowing costs continued to weigh on homebuyers and homeowners considering refinancing.
Total mortgage application volume fell 5.3% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $832,750 or less declined to 7.41% from 7.50%. Points, including the origination fee, decreased to 0.75 from 0.83 for loans with a 20% down payment.
“Mortgage rates decreased for the first time in over two months,” Joel Kan, an MBA economist, said in a statement. “However, lower rates were not enough to boost application activity, as both purchase and refinance applications continued to decline.”
Purchase Applications Drop 7%
Applications for mortgages to purchase homes fell 7% from the previous week and were 18% below the same week a year earlier.
The decline suggests prospective buyers are responding more to the overall elevated level of mortgage rates than to relatively small weekly fluctuations.
The latest figures follow a report from the National Association of Realtors showing a sharp decline in pending home sales during September. Pending sales, which are based on signed purchase contracts, provide an early indication of housing market activity and reflected the impact of rising mortgage rates during the month.
Rates have remained elevated into October, further challenging affordability and discouraging prospective buyers.
Refinancing Demand Remains Weak
Applications to refinance existing mortgages declined 2% from the previous week, a smaller decrease than in several recent weeks when mortgage rates were rising.
However, refinancing applications remained 59% below their level during the same week in 2025.
With mortgage rates now more than a full percentage point higher than a year earlier, relatively few existing homeowners can benefit financially from refinancing their mortgages.
Adjustable-Rate Mortgages Remain Attractive
One indication of how borrowers are responding to higher rates is the continued popularity of adjustable-rate mortgages, or ARMs.
ARMs accounted for 10.5% of total mortgage applications, holding steady from the previous week.
“The ARM share held steady at 10.5 percent, as ARM rates remained almost a full percentage point lower than the 30-year fixed rate, giving qualified borrowers a lower rate option to purchase a home,” Kan said.
Rates Show Little Movement This Week
Mortgage rates have shown relatively little movement to begin the current week, according to a separate survey from Mortgage News Daily.
That follows a volatile previous week in which several monthly inflation reports contributed to fluctuations in borrowing costs.
Mortgage News Daily said rate movements this week appeared to track changes in oil prices, although it cautioned against drawing firm conclusions from that relationship.
“But we’d caution against placing too much emphasis on the oil price correlation,” Matthew Graham, chief operating officer at Mortgage News Daily, wrote. “It’s been highly unreliable for more than a month.”
