Mortgage rates ease for a third week, yet homebuyers keep stepping back

Even as mortgage rates eased, demand for home loans kept weakening last week after a short-lived increase the week before. Total application volume declined 1% week over week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate on 30-year fixed-rate mortgages with conforming loan balances of $832,750 or less slipped to 7.3% from 7.37%. Points also edged down to 0.75 from 0.76, including the origination fee, for borrowers making a 20% down payment.

“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.

Refinance activity was essentially unchanged, rising just 0.1%. Even so, it was 60% below the level of the same week a year earlier. With rates still about a full percentage point above where they were at this time last year, borrowers have little motivation to refinance.

Applications for home purchase mortgages fell 2% from the prior week and were down 19% from a year earlier. After the sharp rate jump in September, the housing market has shown little sign of recovery.

The share of adjustable-rate mortgages continued to increase. These loans typically start with lower rates but can reset higher later on. The average rate on a 5/1 ARM fell to 6.29% from 6.41% the previous week.

“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,” Fratantoni added.

Mortgage rates ticked up slightly at the start of the week in a separate Mortgage News Daily survey, following a hotter-than-expected report on job openings.

“All else equal, stronger labor market data tends to put upward pressure on rates. Tech stocks were also modestly higher, and weakness in the tech sector has been a key factor driving persistently lower rates over the past several weeks,” wrote Matthew Graham, chief operating officer at Mortgage News Daily.