Mortgage Applications Drop as Rates Hit Three-Year High

Mortgage application volume declined 2.75% last week as interest rates reached their highest level in nearly three years. According to the Mortgage Bankers Association, the average contract interest rate for 30-year fixed-rate mortgages rose to 7.50%, contributing to a 37.5% year-over-year drop in total application volume.

Refinancing applications saw the steepest decline, falling 56% compared to the previous year. To manage monthly payments amid rising costs, borrowers increasingly turned to adjustable-rate mortgages (ARMs). The share of ARM loans reached 10.5%, the highest level since October 2025.

The National Association of Realtors reported that August and September were the slowest months for home sales this year. Rising rates have reduced the number of buyers capable of qualifying for home purchases, further cooling the housing market.