Mortgage applications fell once again last week, as higher inflation and continuing uncertainty over the global economy kept interest rates climbing for the seventh straight week.
For the week ending October 9, MBA’s Market Composite Index—a measure of total mortgage loan application volume—fell 2.7% on a seasonally adjusted basis from one week earlier.
The Purchase Index, which measures the volume of mortgage applications to purchase a single-family home, decreased 4% from one week earlier after seasonal adjustment. Purchase applications were down 16% from a year ago.
According to MBA calculations, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances hit 7.5%, up from 7.49% last week, the highest they’ve been been since November 2023 and a percentage point higher than they were a year ago.
Per Freddie Mac, mortgage rates jumped to 7.4% last week, up from 6.66% in late August — an increase of 74 basis points.
That equates to “a 7.2% loss of purchasing power, or over $22,000 in house price for a buyer with a $2,000 monthly principal and interest budget,” explains Realtor.com Senior Economist Jake Krimmel. “Given these numbers, it’s no surprise that housing demand has been hit hard.”
And buyers likely won’t see any interest rate relief for the rest of the year, says MBA Chief Economist Mike Fratantoni.
“Inflation is too high, leading central banks to raise short-term rates, while budget deficits and debt are unsustainably high, leading bond investors to push up longer-term rates,” Fratantoni said at the group’s annual conference on Sunday.
Fratantoni predicted that interest rates will remain around 7.3% for the rest of the year and hover above 7% through 2027.
Interest rate sticker shock has led more borrowers to pursue adjustable rate mortgages, accoring to the MBA’s latest data.
“Mortgage applications decreased as rates moved higher last week. The 30-year fixed rate was 7.5 percent, the highest rate since November 2023 and more than a percentage point higher than a year ago,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “As a result, borrowers continue to rely more on ARM loans to help lower their monthly payments. The ARM share at 10.5% was at its highest level since October 2025.”
The share of FHA loan applications remained unchanged at 16.4% from the prior week. The VA share of total applications increased slightly to 11.9% from 11.8% the prior week. The USDA share of total applications increased slightly to 0.6% from 0.5% the week prior.
Meanwhile, the refinance share of mortgage activity increased to 37.7% of total applications from 37% the previous week, though the overall refinance index decreased 0.4% from the previous week and was 56% lower than the same week one year ago, as homeowners remain locked into their lower interest rates.
Despite mortgage rates remaining high, the National Association of Realtors® reported that in September home sales rose 1.5% on a monthly basis, though sales remain down year over year.
How mortgage rates are calculated
Mortgage rates are calculated based on various factors in the economy, and the length of your loan and credit score will also factor into the mortgage rate you qualify for.
The 30-year mortgage rate is tied to the yield of the 10-year Treasury note, because most 30-year mortgages are either paid off or refinanced in roughly eight to 11 years.
That makes the duration on the loans roughly comparable, and mortgage lenders use the 10-year Treasury as a benchmark for setting rates, adding on a risk premium.
Long-term yields for Treasury notes are determined by a number of factors, including the supply of and demand for U.S. government debt, and investor expectations for inflation over the life of the bonds.
