Mortgage Applications See Decline as Interest Rates Hold Steady
Summary:
Mortgage applications have decreased by 6% compared to the previous week, with the refinance index dropping significantly. The average contract interest rate for 30-year fixed-rate mortgages also saw a decline, indicating a softening job market and sticky inflation. Despite these trends, the purchase application volume is expected to grow modestly by 2026.
What This Means for You:
- Practical Implication #1: If you’re considering refinancing, now might be a good time to lock in a lower rate before potential increases.
- Implication #2 with Actionable Advice: Homebuyers should act quickly to secure favorable mortgage rates before market conditions worsen.
- Implication #3 with Actionable Advice: Monitor inflation and job market trends closely, as they directly impact mortgage rates and application volumes.
- Future Outlook or Warning: Expect continued modest growth in home sales over the next few years, but be wary of rising interest rates and inflation.
Original Post:
On an unadjusted basis, the index decreased 6% compared with the previous week.
The refinance index decreased 6% from the previous week and was 110% higher than the same week one year ago. The refinance share of mortgage activity increased to 59.1% of total applications from 59.0% the previous week.
The seasonally adjusted purchase index decreased 4% from one week earlier. The unadjusted purchase index decreased 6% compared with the previous week and was 16%5 higher than the same week one year ago.
“Overall mortgage application volume fell last week, despite the slight decline in mortgage rates,” said Mike Fratantoni, MBA’s SVP and chief economist. “MBA expects the trends of a softening job market, sticky inflation, elevated home inventories and steady mortgage rates will persist into the new year.”
Added Fratantoni, “Purchase application volume last week was 16% higher than a year earlier. We are forecasting continued, modest growth in terms of home sales in 2026.”
By product, the adjustable-rate mortgage (ARM) share of activity increased to 8.1% of total applications. The Federal Housing Administration (FHA) share of total applications increased to 20.8% from 19.5% the week prior. The U.S. Department of Veterans Affairs (VA) share of total applications decreased to 15.3% from 16.6% the week prior, while the U.S. Department of Agriculture (USDA) share of total applications remained unchanged at 0.4% from the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased to 6.31% from 6.38%, while rates for 30-year fixed-rate mortgages with jumbo loan balances increased to 6.52% from 6.44%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 6.14% from 6.12% and rates for 15-year fixed-rate mortgages decreased to 5.70% from 5.72%. The average contract interest rate for 5/1 ARMs increased to 5.79% from 5.63%.
The MBA noted in its report that its offices will be closed beginning on Thursday, Dec. 25, 2025, and will reopen on Friday, Jan. 2, 2026. Due to the closures, the results for weeks ending Dec. 26, 2025, and Jan. 2, 2026 will both be released on Wednesday, Jan. 7, 2026.
Extra Information:
Mortgage Applications Fall as Interest Rates Rise
Borrowers Consider Adjustable-Rate Mortgages
Mike Fratantoni’s Expert Analysis on Mortgage Trends
People Also Ask About:
- What is the current trend in mortgage applications? Mortgage applications have decreased by 6% compared to the previous week.
- How do interest rates affect mortgage applications? Higher interest rates have led to a decline in mortgage applications.
- What types of mortgages are most popular now? Adjustable-rate mortgages (ARMs) have seen an increase in popularity.
- What is the forecast for home sales? Modest growth in home sales is expected to continue into 2026.
- How does the job market impact mortgage rates? A softening job market and sticky inflation are expected to persist, affecting mortgage rates.
Expert Opinion:
The recent decline in mortgage applications, despite a slight drop in interest rates, suggests a complex interplay between economic factors. Mortgage applicants should stay informed about broader economic trends, such as job market conditions and inflation, to make timely and informed decisions.
Key Terms:
- Mortgage applications decline
- Interest rates steady
- Refinance index drop
- Adjustable-rate mortgages
- Home sales forecast
- Job market impact
- Inflation trends
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