Potential buyers take a tour during an open house at a home on Sunday, July 13, 2025 in Los Angeles, California, United States.
Eric Thayer | Bloomberg | Getty Images
Despite interest rates falling slightly, overall demand for mortgages weakened again last week. However, those still in the market are increasingly turning to adjustable rate loans to get the lowest possible interest rates.
Total mortgage applications fell 4.7% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $806,500 or less, including origination fees for loans with a 20% down payment, decreased by a point from 0.61 to 0.60 and from 6.46% to 6.43%. That was just 7 basis points lower than the same week a year ago.
Mortgage refinance applications spiked in mid-September, fell again two weeks ago, and fell even further last week, falling 8%. Refinance demand remains 18% higher than the same week a year ago.
“Refinance application activity generally declined last week, with fixed-rate mortgage rates largely unchanged, with the exception of a small increase in FHA refinance applications,” said Mike Fratantoni, senior vice president and chief economist at MBA.
The number of applications for mortgages to buy homes fell by 1% in the week, but rose by 14% from a year earlier. Purchase demand hasn’t moved much over the past few months as potential homebuyers grapple with soaring prices and heightened economic uncertainty. While the supply of homes for sale is up compared to a year ago, more sellers are delisting their properties or choosing to wait to list them.
For people looking to buy or refinance a mortgage, lower interest rates have made adjustable rate mortgages, which are a bit riskier, increasingly popular. The interest rate terms of an ARM can be fixed for up to 10 years, but the loan is considered riskier because once the fixed period ends, the interest rate can increase depending on market conditions.
“The share of ARMs rose to 9.5% last week from 8.4% last week. Our research shows that 5/1 ARM rates are, on average, nearly 1 percentage point lower than 30-year fixed rates, and this difference is driving more buyers and refinance buyers to consider ARMs,” Fratantoni said.
With no government data on the economy released due to the government shutdown, the bond market has remained relatively calm, with little hope of a rise in mortgage rates this week.
