Easing rates spark a brief rebound in loan demand, but purchase volumes remain 18% below last year
For the second week running, mortgage rates have nudged lower. For brokers who have spent much of 2026 watching demand stall against a wall of elevated borrowing costs, even a modest move matters.
Total mortgage applications climbed 3.4% for the week ending October 23, as the 30-year fixed rate fell to its lowest point in three weeks, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey.
The back-to-back rate decline offered brokers a modest reopening of conversation with buyers, though conditions across both the purchase and refinance markets remain deeply challenged.
The Market Composite Index, the MBA’s seasonally adjusted measure of total loan application volume, rose 3.4% week over week, or 3% on an unadjusted basis.
The average contract interest rate on 30-year fixed-rate mortgages with conforming loan balances, capped at $832,750, fell to 7.37% from 7.41%, with origination points edging up to 0.76 from 0.75 for 80% loan-to-value (LTV) loans.
As major banks revised their Federal Reserve rate expectations throughout 2026, even incremental rate relief has been welcomed by a market navigating near-historic affordability pressures.
Joel Kan, CMB, vice president and deputy chief economist at the MBA in Washington, DC, said the movement delivered real but narrow relief.
"The decline in rates gave borrowers some relief, with applications rebounding slightly, particularly conventional applications. Mortgage rates are still more than a percentage point higher than the same week last year and most homeowners still have rates much lower than prevailing market rates," he said.
ARM share climbs to 14-month high
With fixed rates still elevated, a growing share of applicants are pivoting to adjustable-rate mortgages (ARMs).
The ARM share of total applications rose to 11.3%, its highest in more than a year, as the average contract rate on 5/1 ARMs eased to 6.41% from 6.46%, offering a near-one-percentage-point discount against the 30-year fixed.
ARMs reset to prevailing market rates at the end of their introductory terms, a dynamic brokers should communicate clearly to rate-sensitive clients.
After mortgage rates fell from a nine-month high earlier in 2026, before climbing back to current levels, ARM uptake has been building steadily.
Jumbo 30-year loans averaged 7.28%, while FHA-backed mortgages averaged 7.12%.
New data from the S&P CoreLogic Case-Shiller and Federal Housing Finance Agency (FHFA) showed continued home price growth in August, though affordability pressures remain as inflation and mortgage rates continue to weigh on buyers. https://t.co/tawpgNZrLV
— Mortgage Professional America Magazine (@MPAMagazineUS) October 27, 2026
Purchase demand still running well behind year-ago levels
Purchase applications rose 4% on a seasonally adjusted basis but remained 18% below the same week in October 2025.
According to data from the Federal Housing Finance Agency’s (FHFA) National Mortgage Database, approximately half of all outstanding mortgage holders carry rates below 4%, leaving most with little financial reason to sell or refinance at current levels.
Refinance applications gained 3% week over week but sat 61% below year-ago levels. The refinance share of total applications slipped to 38.9% from 39.0%.
“While purchase applications increased over the week, they were 18 percent behind last year’s pace as many homebuyers have put their purchase plans on hold,” Kan added.
“Similarly, refinance applications were down more than 60 percent from a year ago, as most borrowers have little to gain from refinancing.”
With the Fed’s two-day meeting now underway, markets are pricing in a hold, with futures traders putting the probability at 88.4% as of Tuesday, according to CME FedWatch.
Glen Weinberg, chief operating officer and partner at Fairview Commercial Lending, told Mortgage Professional America this week that the central bank’s inflation focus – not employment data – should be driving its decision.
“All they need to do is focus on their one thing, inflation, because as soon as they start focusing on employment, they aren’t taking the right steps for inflation,” he said.
Barry Habib, CEO of MBS Highway, was more direct about what the bond market is signaling.
Speaking at NAMB National in Las Vegas, the National Association of Mortgage Brokers’ annual conference, Habib told MPA: “That 2-year Treasury yield right now is telling us that the Fed probably needs to raise another half a percent.”
For brokers cautiously optimistic heading into 2026, the rate environment has proven more stubborn than most anticipated.
With the MBA projecting further rate increases in December and the first quarter of 2027, any meaningful easing in purchase or refinance demand is unlikely before the new year.
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