Adjustable-Rate Mortgages Reach Their Highest Share Since September 2025

Although the 30-year mortgage rate eased to 7.3%, borrowing activity remains subdued, according to Mike Fratantoni, MBA’s senior vice president and chief economist.

Mortgage rates slipped slightly during the latest week, but even at 7.3%, the decline was not enough to meaningfully lift demand from borrowers seeking 30-year fixed-rate loans. By contrast, adjustable-rate mortgages, which start at a lower monthly payment, continued to appeal to buyers.

The Mortgage Bankers Association’s latest Market Composite Index, which tracks overall mortgage lending activity including both purchases and refinances, fell 1.2% on a seasonally adjusted basis after rising 3.4% the previous week. On an unadjusted basis, the index was down 2% from the week before.

The pullback came after several weeks of volatility, with the 30-year fixed rate still hovering around 7.29% according to Freddie Mac and 7.25% according to Mortgage News Daily. Freddie Mac’s next rate update is due Thursday.

Fratantoni said mortgage rates fell to their lowest point since September 2026 after the Federal Reserve opted not to raise rates at its October meeting. He added that while the 30-year rate dipped to 7.3%, overall activity remained weak, with purchase applications lower for the week and refinance volume essentially unchanged at a very low level.

The MBA again pointed to a larger share of adjustable-rate mortgages as evidence that some borrowers are adapting to the current rate environment. The average contract interest rate for 5/1 ARMs fell to 6.29% from 6.41%, while points dropped to 1.00 from 1.20, including the origination fee, for 80% loan-to-value mortgages. The ARM share of total applications rose to 11.4%, according to the report.

Fratantoni said more borrowers are choosing ARMs to reduce their initial payments, and that the ARM share has reached its highest level since September 2025.

An adjustable-rate mortgage begins with a fixed interest rate for an initial period, usually five years, and then resets annually for the rest of the loan based on market conditions.

The MBA’s Refinance Index edged up 0.1% from the previous week, but it remained 60% below the level from the same week a year earlier. The seasonally adjusted Purchase Index, which measures nationwide home loan applications from a sample representing about 75% of U.S. mortgage activity, fell 2% week over week. The unadjusted Purchase Index declined 4% from the prior week and was 19% lower than the same week a year ago, the report said.

The refinance share of mortgage activity increased to 39.8% from 38.9% the week before, according to the MBA.

Among government-backed loans, the FHA share of total applications fell to 16.0% from 16.6% the previous week. The VA share rose to 11.2% from 11.0%, while the USDA share increased to 0.6% from 0.5%.