Demand hits its slowest weekly pace since 2025 as ARM share climbs to its highest level since October 2025
Mortgage application volume fell 6% in the week ending September 25, as the 30-year fixed rate surged to its highest level in nearly three years, according to the Mortgage Bankers Association (MBA).
Both purchase and refinance demand retreated to their slowest weekly pace since 2025, leaving brokers with a narrowing pipeline and borrowers shopping increasingly on price.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, capped at $832,750, climbed to 7.30% from 7.12% the prior week, marking the sixth consecutive weekly increase.
Jumbo borrowers faced comparable headwinds, with that rate rising to 7.27% from 7.15%. The 15-year fixed followed suit, moving to 6.56% from 6.43%.
"Government refinances declined 13 percent, with both FHA and VA applications experiencing double digit decreases over the week," said Joel Kan, CMB, MBA's Vice President and Deputy Chief Economist.
Refinance retreat deepens
The Refinance Index fell 9% week over week and landed 56% below the same period one year ago, a reversal from the refi conditions that defined much of 2025.
The refinance share of total applications slipped to 38.3% from 39.3%. Government-backed products bore the steepest declines: the FHA average contract rate climbed to 6.97% from 6.78%, while the VA share of total applications edged down to 11.9% from 12.0%.
Edward Seiler of the Mortgage Bankers Association says monthly mortgage payments eased in August as smaller loan sizes helped offset higher rates, although affordability continues to vary significantly across markets.https://t.co/PdtWg8gCic
— Mortgage Professional America Magazine (@MPAMagazineUS) September 25, 2026
Borrowers pivot to adjustable-rate products
With fixed rates elevated, adjustable-rate mortgages are absorbing some of the displaced demand. The ARM share of total applications climbed to 10.3%, its highest level since October 2025, as borrowers sought pricing relief unavailable in the fixed-rate market.
The 5/1 ARM averaged 6.47%, up from 6.10%, but continued to sit well below the 30-year fixed, maintaining a meaningful cost advantage for rate-sensitive clients.
Purchase applications declined 4% on a seasonally adjusted basis and fell 14% against the same week in 2025.
Home prices are compounding the strain: US national home prices rose 1.9% year over year in July, accelerating from a 1.6% gain in June, according to the S&P Cotality Case-Shiller index.
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