MBA Mortgage Applications Rise 3.4% as Rates Retreat From Peak

A small rebound in a weak fall market

Mortgage applications rose last week, but the increase doesn't change the picture of a housing market that has slowed sharply this fall. The Mortgage Bankers Association's composite index rose 3.4% on a seasonally adjusted basis in the week ending October 23, 2026. The seasonally adjusted purchase index gained 4%, and refinance applications rose 3%.2 The rebound came after borrowing costs fell for a second straight week. MBA's average contract rate on a conforming 30-year fixed loan slipped to 7.37% from 7.41%, its lowest reading in three weeks.2

The yearly comparisons tell more of the story than the weekly change. Unadjusted purchase applications were 18% below the same week in 2025, and the refinance index was 61% lower than a year earlier.23 MBA deputy chief economist Joel Kan said many buyers have put their plans on hold. He also said that rates remain more than a percentage point above last year's levels, so most homeowners have little reason to refinance.2

The best reading is that the market has paused its decline, not started a recovery. October's weekly reports show why one good week means little. Applications fell 4.2% in the week ending October 2, when the 30-year contract rate jumped to 7.49%.1 They slipped another 2.7% the next week as the rate reached 7.5%, its highest level since November 2023.4 They then dropped 5.3% in the week ending October 16, even though rates fell for the first time in more than two months.5 Kan said at the time that the higher-rate environment had clearly cooled the housing market this fall.6 The rebound in the latest week is smaller than the losses that came before it.

Adjustable-rate loans are filling the gap

The rising use of adjustable-rate mortgages may be the clearest sign of how stretched buyers are. The ARM share of applications reached 11.3% in the latest survey, its highest level in more than a year. Kan said borrowers are choosing these loans to lower their monthly payments.2 The share had already reached 10.5% in mid-October, the highest since October 2025.4 The appeal is clear. MBA's 5/1 ARM contract rate was 6.41% last week, almost a full point below the 30-year fixed rate.26

The trade-off is risk. The lower starting payment can reset higher later, a point some coverage has stressed for borrowers and lenders weighing whether the loan fits a buyer's plans.9 When a growing share of buyers takes on rate risk just to qualify, it suggests demand is being squeezed into whatever financing still works, not that demand is recovering.

Credit-pull data point the same way. Xactus's Mortgage Intent Index rose about 2.8% in the latest week but stayed more than 20% below the same week last year.3 The week before, it fell 5.65% to 96.9, about 25% below the prior year, though the Columbus Day holiday weighed on that reading.5

The rate picture: lower this week, but no relief expected

Freddie Mac's weekly survey showed a similar easing. Its average 30-year fixed rate fell to 7.24% in the week ending October 29, from 7.32% a week earlier. The 15-year rate fell to 6.60%.19 Chief economist Sam Khater said the 30-year rate had reached its lowest level of the month, giving prospective buyers a small boost in purchasing power.19 Freddie Mac's 30-year average had been 6.17% a year earlier.19

The longer trend is still upward. Freddie Mac's 30-year rate rose from about 6.65% in late August to 7.40% on October 8 and again on October 15. October 22 brought the first weekly decline since August.14 The move followed Treasury yields. The 10-year yield was near 5% and has traded in a narrow range around that level.1320 The Federal Reserve held its target range at 3.75% to 4.00% on October 28.13 Prediction-market traders were pricing a strong chance of a December rate hike before that meeting.14

Forecasters expect rates to stay high. Fannie Mae's October outlook puts the 30-year rate at about 7.4% in the fourth quarter and 7.5% through the third quarter of 2027. MBA's forecast is slightly lower, at 7.3% this quarter and 7.2% after that.13 MBA chief economist Mike Fratantoni has said he expects no significant relief in mortgage rates over the forecast period.13 Bright MLS chief economist Lisa Sturtevant expects rates to rise from current levels.18 Forecasters differ only on whether rates hold steady or climb. None of the forecasts cited here points to a return to the 6% range.

Home sales: closings held up, contracts fell sharply

Sales data show the same slowdown. Existing-home sales rose 1.5% in September to a seasonally adjusted annual rate of 3.99 million.35 However, NAR chief economist Lawrence Yun said August and September were still the two slowest months of the year.32

The more important figure is contract signings. Pending home sales, which track signed contracts, fell 7.3% from August and 11.3% from a year earlier, with declines in every region.3634 Reuters described the level as a record low.39 Wolf Richter's analysis said contract volume was nearly 40% below September 2019 and the lowest in data going back to 2010.37 Forecasters had expected only a small decline, so the 7.3% drop was a large miss.33

Regional coverage agrees. The West had the largest monthly drop at 9.2%, followed by the South at 8.2%.34 Because contracts usually close one to two months after signing, September's drop points to weaker closings in the coming months, even though completed sales rose that month.34 Weekly data from late October showed contract signings steadying for a week but still about 22.5% below 2025 levels.40 That matches the MBA data: the slide may have paused, but activity remains far below last year.

Home prices are still rising slowly

Prices have not fallen with demand, at least at the national level. The S&P Cotality Case-Shiller national index rose 2.1% from a year earlier in August, up from 1.9% in July. Chicago led major metros with a 6.7% gain.25 Another data feed reported a 2.7% headline reading for the release, which likely reflects a different index measure.23 Either way, prices were still rising. NAR's September median existing-home price was $417,500, up 1.3% from a year earlier and the highest on record for September.35

The national figures hide more variation underneath. Inventory has risen to 1.60 million homes, or a 4.8-month supply, which gives buyers more room to negotiate.35 Realtor.com's weekly data showed the median listing price down 2.1% from a year earlier.40 Some markets have posted much larger declines, including reported drops of more than 20% in Austin and Oakland.37 Freddie Mac has also lowered its outlook. It now expects home prices to rise 1.3% over the next 12 months and 1.5% over the following 12 months, down from earlier forecasts.17 National prices are still edging up, but the momentum is fading, and more sellers are cutting prices.

Builders are pulling back

Construction is slowing as well. Housing starts fell 5.2% in September to an annual rate of 1.221 million, 7.4% below a year earlier. Single-family starts fell 4.6% to 859,000.4241 Census noted that the monthly change was within the survey's margin of error, which is a reason not to overread one month.4344 The broader trend is still weak. September was the second-lowest month in 25 months and about 9% below the 12-month average.45 Single-family permits, an early signal for future construction, fell 4.0% to 845,000.41

The sharpest yearly decline was in apartment construction. Starts in buildings with five or more units were 25.9% below a year earlier.45 NAHB's Danushka Nanayakkara-Skillington said high borrowing costs and affordability problems are holding back builders. She expects production to fall further in 2027 as rates stay high and material costs rise.50 Completions were 14% below a year earlier, so less new supply is coming even as resale inventory rises.47

What it means

The October data point the same way. Buyers are applying for fewer mortgages, signing fewer contracts and turning to riskier loans, while builders are starting fewer homes. The 3.4% weekly gain shows that demand responds when rates ease. Still, the size of the year-over-year declines suggests rates near 7.3% are close to the limit of what many buyers can afford.213 With major forecasters expecting rates to stay above 7% into 2027, any spring recovery will likely depend more on price cuts in softer markets than on cheaper credit.1317 The next tests are November's pending-sales and housing-starts reports, both due November 18.3142