Mortgage demand has fallen for the second consecutive week, with total application volume down 1% according to the Mortgage Bankers Association. This decline occurred even as the average contract interest rate for 30-year fixed-rate mortgages decreased to 7.3% from 7.37%.
Mike Fratantoni, MBA's SVP and chief economist, noted that rates are at their lowest since September 2026, following the Federal Reserve's decision to pause rate hikes. However, refinance demand remains stagnant, up only 0.1% week-over-week but down 60% compared to the same week last year.
Purchase mortgage applications also fell by 2% week-over-week and are 19% lower year-over-year, reflecting a continued freeze in the housing market after significant rate increases in September. The share of adjustable-rate mortgages (ARMs) is rising, with the average rate on a 5/1 ARM dropping to 6.29%.
Fratantoni highlighted that borrowers are increasingly opting for ARMs to reduce initial payments, with ARM share reaching its highest level since September 2025. However, mortgage rates have slightly increased at the start of this week due to stronger-than-expected job openings data, which typically puts upward pressure on rates.
This trend, combined with recent weakness in the tech sector, suggests that the housing market may remain under strain as potential homebuyers continue to exit the market