Aerial view of two-story single-family homes lining a neighborhood street on January 13, 2026 in Thousand Oaks, California.
Kevin Carter | Getty Images
Last week, mortgage rates rose to the highest level in nearly three years, causing overall demand to decline. However, the demand for riskier mortgages continues to grow.
Total mortgage applications fell 2.7% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. This was a 37.5% decrease compared to the same week a year ago.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $832,750 or less, including origination fees for loans with a 20% down payment, decreased from 0.84 to 0.83 points and increased from 7.49% to 7.50%. This rate was more than 1 percentage point higher than a year ago.
“As a result, borrowers are increasingly relying on ARM (adjustable rate mortgage) loans to lower their monthly payments,” MBA Economist Joel Kang said in the release. “ARM’s share was 10.5%, the highest level since October 2025.”
ARMs offer lower interest rates and can be fixed for up to 10 years, after which they adjust based on future interest rates. That’s why they are considered more risky.
Mortgage refinance applications have been hit hardest by rising interest rates, and the decline in the pool of borrowers is easing significantly. The number of these applications was down 0.4% for the week and 56% year over year.
The number of applications for mortgages to buy homes fell by 4% during the week, and by 16% compared to the same week last year. There are now more homes available for sale, most of which are high-end homes on the market. Supply is also increasing, not because of new listings, but because of sluggish sales. Housing prices also continue to rise.
Existing home sales rose slightly in September from August, but those sales were based on summer market conditions when interest rates were low, according to a Tuesday report from the National Association of Realtors.
“August and September were the two slowest months for home sales this year, despite modest monthly growth on a seasonally adjusted basis,” NAR Chief Economist Lawrence Yun said in a release. “Further increases in mortgage rates in recent weeks mean fewer buyers will be eligible to purchase homes.”
Correction: Last week’s total number of mortgage applications decreased by 2.7% from the previous week. The diagram was misspelled in previous versions. Closed home sales in September increased slightly from August. The timeline was incorrectly listed in previous versions.
