Rising rates are reshaping loan demand and sending borrowers to adjustable-rate products not seen since last year
Mortgage applications fell 1.5% for the week ending September 18, as the 30-year fixed rate hit 7.12%, its highest point since May 2024.
The data comes from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey. The jump is deepening an affordability crunch that is driving a growing share of borrowers toward adjustable-rate products.
The average contract rate for 30-year fixed-rate mortgages with conforming loan balances, capped at $832,750, rose from 6.97% the previous week.
Jumbo borrowers saw comparable pressure, with the 30-year jumbo rate climbing to 7.15% from 7.03%. Results included an adjustment for the Labor Day holiday.
Refinancing retreats to 2025 lows
The Refinance Index dropped 3% week over week and plunged 62% compared with the same period one year ago, the slowest refinancing pace since February 2025.
The refinance share of total applications edged down to 39.3% from 39.4%.
The seasonally adjusted Purchase Index fell 1%, and purchase volume remains 11% below the same week in 2025.
"With this week's decline, the pace of refinancing fell to its slowest pace since February 2025," said Mike Fratantoni, senior vice president and chief economist at the MBA.
Melissa Cohn of William Raveis Mortgage highlighted that when markets see the Federal Reserve effectively tackling inflation, bond yields can decline, potentially bringing mortgage rates down despite higher benchmark rates.https://t.co/E3CHIOsyLQ
— Mortgage Professional America Magazine (@MPAMagazineUS) September 18, 2026
ARM demand climbs as rate gap widens
The renewed rate pressure has revived demand for adjustable-rate mortgages. The ARM share of applications jumped to 9.8%, up from 8.4% the prior week. The 5/1 ARM rate eased to 6.10% from 6.23%, sitting more than a full percentage point below the 30-year fixed.
"With fixed rates much higher, more borrowers opted for ARMs, with the ARM share reaching 9.8%, as rates for 5/1 ARMs were more than a percentage point lower than those for fixed rate loans," Fratantoni said.
The shift tracks a pattern MPA has covered throughout 2026. The widening spread between fixed and variable rates has led brokers to increasingly pivot toward adjustable-rate mortgages as the rate gap between fixed and variable products widens, a strategy that is now reaching a broader slice of the borrower market.
September's data arrives in a market already strained by limited inventory and persistent home prices. The national median home sale price reached $395,000 in August, a 2.1% year-over-year gain, even as sales volume declined and the number of available homes continued to expand, according to Homes.com's national housing market report.
High mortgage rates are also keeping the US housing market subdued through 2026, with the MBA itself forecasting the 30-year rate in a 6.1%–6.3% range for Q4, a projection September's reading has already overtaken.
FHA's application share dipped to 16.7%, VA fell to 12%, and USDA edged up to 0.6%.
For brokers assessing what could still make or break a 2026 housing market recovery, September's data leaves little room for near-term optimism.
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