Mortgage Applications Fall as Rates Hit September Lows

The Mortgage Bankers Association reported a 1.2% decrease in mortgage application volume last week, even as contract interest rates fell for the third consecutive week. The average contract interest rate for 30-year fixed-rate mortgages dropped to 7.3% from 7.37%, marking the lowest level since September 2026. This downward trend followed the Federal Reserve's decision in October to halt additional rate hikes.

Despite the lower rates, the housing market remains stagnant. Purchase applications fell 2% week-over-week and 19% year-over-year. To manage costs, more borrowers are opting for adjustable-rate mortgages (ARMs) to reduce initial payments, pushing the ARM share to its highest level since September 2025.

Recent economic data has already begun to reverse the rate decline. Mortgage rates ticked upward early this week following a stronger-than-expected jobs report, as robust labor market data typically exerts upward pressure on interest rates.