The 30-year fixed rate fell to 7.41% for the first time in two months, but purchase and refinance demand kept sliding
Falling mortgage rates offered brokers and their clients a momentary reprieve last week, but it wasn’t enough to reverse a market in retreat.
Mortgage applications across the United States declined 5.3% in the week ending October 16, on a seasonally adjusted basis, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey.
The 30-year fixed rate on conforming loan balances of $832,750 or less dropped to 7.41% from 7.50% the prior week, its first decline in over two months.
Rates on jumbo loans eased to 7.33%, FHA-backed mortgages fell to 7.13%, and the 15-year fixed came in at 6.73%. Despite the across-the-board relief, demand continued to contract.
“Mortgage rates decreased for the first time in over two months, with the 30-year fixed rate dropping to 7.41%,” said Joel Kan, CMB, MBA’s vice president and deputy chief economist in Washington, DC.
“However, lower rates were not enough to boost application activity, as both purchase and refinance applications continued to decline. Purchase applications fell 18% behind last year’s pace, as higher rates are pricing buyers out of the market.”
Purchase demand takes the harder hit
The seasonally adjusted Purchase Index dropped 7% week-over-week, landing 18% below the same week in October 2025.
National Association of Realtors (NAR) Chief Economist Lawrence Yun, in Washington, DC, stated in response to September’s slide in pending home sales: “Further increases in mortgage rates in recent weeks mean fewer buyers can qualify to purchase a home.”
Refinance applications posted a comparatively modest 2% weekly decline but remain 59% below October 2025’s pace, a function of how small the pool of borrowers who can benefit from a refinance at 7.41% has become.
“It is very clear that the higher mortgage rate environment has cooled the housing market this fall,” Kan added.
Joel Kan of the Mortgage Bankers Association says new home purchase applications fell to their lowest level in six years as rising borrowing costs weighed on buyers, particularly first-time purchasers relying on FHA financing. https://t.co/Pf7V8lz8zm
— Mortgage Professional America Magazine (@MPAMagazineUS) October 15, 2026
ARMs hold their position
The ARM share held steady at 10.5% of total applications for the second consecutive week. With 5/1 ARM rates averaging 6.46%, adjustable-rate products remain nearly a full percentage point below 30-year fixed alternatives, a meaningful gap for affordability-stretched buyers who qualify.
Government-backed loan shares also retreated. The FHA share edged down to 16.3% from 16.4%, VA fell to 11.5% from 11.9%, and USDA slipped to 0.5% from 0.6%.
The refinance share ticked up to 39.0% from 37.7%, less a sign of growing demand than a mathematical consequence of purchase applications falling faster.
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