Home Loan Rates Ease Again as Purchase Demand Softens

Mortgage demand slipped last week even though home loan interest rates fell for a third straight week, offering some relief to prospective buyers.

For the week ending Oct. 30, the Mortgage Bankers Association’s Market Composite Index, which tracks total mortgage application volume, dropped 1.2% on a seasonally adjusted basis from the prior week.

The Purchase Index, which measures applications for loans used to buy single-family homes, declined 2% after seasonal adjustment. Purchase applications were 19% lower than a year earlier.

MBA data showed the average contract rate for 30-year fixed mortgages with conforming loan balances at 7.3%, down slightly from 7.37% the week before. A year earlier, the average rate was 6.17%.

A separate Freddie Mac survey put the average mortgage rate at 7.24%, down from 7.32% the previous week.

“Mortgage rates drifted down to their lowest level since September 2026 last week in the wake of the Federal Reserve's decision to hold on additional rate hikes at its October meeting,” said Mike Fratantoni, MBA’s senior vice president and chief economist. “While the 30-year rate declined to 7.3%, activity is still quite slow, with purchase application volume down for the week and refinance volume effectively flat at a very low level.”

“As we have highlighted in recent weeks, more borrowers are choosing ARMs in this environment to lower their initial payments, with the ARM share at its highest level since September 2025.”

The shift has pushed more borrowers toward adjustable-rate mortgages. Fratantoni said the ARM share reached its highest level since September 2025.

ARM rates are nearly a full percentage point below the 30-year fixed mortgage rate, and the share of ARM applications rose week over week from 11.3% to 11.4%.

The share of FHA loan applications fell to 16% from 16.6% the prior week. VA loans accounted for 11.2% of total applications, up from 11%, while USDA loans rose to 0.6% from 0.5%.

Meanwhile, refinancing made up 39.8% of mortgage activity, up from 38.9% the week before. Although the refinance index increased 0.1% from the prior week, it remained 60% below the same period a year earlier as many homeowners stay locked into lower rates.

Even though Federal Reserve Chairman Kevin Warsh and the Federal Open Market Committee chose not to raise rates again last week, market watchers are looking toward the next Fed meeting in December for more clues on interest rates.

CME Group’s FedWatch tool shows the odds of another rate hike at just under 80%.

With Democrats gaining control of both the House and Senate, voters will be watching closely to see what economic policies emerge to improve housing affordability.

“Many Democrat campaigns tapped into voter dissatisfaction with the economy, a winning strategy in 2026. Democrats have a clear mandate to focus on pocketbook issues, but whether they can translate that into a legislative agenda that delivers on that mandate remains to be seen,” says Realtor.com® senior economist Jake Krimmel.

“Legislative options are likely to be limited in a divided Washington where a Democratic House and Senate will either need to work with the Republican White House or find enough Republican legislative support to override a likely veto,” he adds.

How mortgage rates are determined

Mortgage rates are shaped by a range of economic factors, and the length of the loan plus a borrower’s credit score also influence the rate offered.

The 30-year mortgage rate is closely linked to the yield on the 10-year Treasury note because most 30-year mortgages are paid off or refinanced in about eight to 11 years.

That makes the time frames roughly comparable, so mortgage lenders use the 10-year Treasury as a benchmark and add a risk premium when setting rates.

Long-term Treasury yields are influenced by several factors, including supply and demand for U.S. government debt and investor expectations for inflation over the life of the bonds.