In an aerial view, two-story single-family homes line the streets of the neighborhood on January 13, 2026 in Thousand Oaks, California.
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Mortgage rates moved to their highest levels in nearly three years, driving overall demand down. Cleaner mortgages, however, continue to get a lot of demand.
Total mortgage application volume fell 2.7% last week compared to the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. It is also 37.5% lower than the same week a year ago.
The average contract interest rate for a 30-year fixed-rate mortgage with a qualifying loan balance of $832,750 or less increased to 7.50% from 7.49%, with a point decrease to 0.83 from 0.84, including origination fees, for loans with a 20% down payment. That rate is more than a full percentage point higher than a year ago.
“As a result, borrowers continue to rely more on ARMs [adjustable-rate mortgage] loans to help reduce monthly payments,” said Joel Kan, an MBA economist, in a release. “ARM shares at 10.5 percent are at their highest level since October 2025.”
ARMs offer lower interest rates and can be fixed for up to 10 years, but then adjust depending on future interest rates. That is why they are considered more risky.
Applications for home loan refinance have been hardest hit by higher rates, as the shrinking pool of borrowers can now find relief. This application declined 0.4% for the week and 56% lower year-on-year.
Applications for mortgages to buy homes fell 4% for the week and 16% lower than the same week a year ago. There are more homes for sale today, but they are usually at the higher end of the market. Supply also increased not because of new listings, but because of slower sales. House prices also continue to rise.
While closed home sales rose slightly in September from August, according to a Tuesday report from the National Association of Realtors, those sales were based on market conditions during the summer, when rates are lower.
“Although the monthly gain is small on a seasonally adjusted basis, August and September marked the two slowest months for home sales this year,” said Lawrence Yun, NAR’s chief economist, in a release. “Mortgage rates have been higher in recent weeks which means fewer buyers are able to buy a home.”
Correction: The total volume of mortgage applications decreased by 2.7% last week compared to the previous week. An earlier version misstated the figure. Closed home sales rose slightly in September from August. The previous version misstated the timeline.