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Mortgage rates drop for the third straight week, but homebuyers are still leaving the market
Mortgage applications to buy homes fell for a third week, despite a third consecutive weekly drop in mortgage rates. The continuing decline suggests lower rates have not yet revived a housing market chilled by a sharp rate rise in September.
Purchase applications were down 2% from the previous week and 19% year on year. More borrowers are turning to adjustable-rate mortgages to reduce initial payments: the average 5/1 ARM rate fell to 6.29% from 6.41%, and ARM use reached its highest share since September 2025. Rates edged higher at the start of this week after stronger-than-expected job openings data; the Mortgage Bankers Association later corrected the fall in total application volume to 1.2%.
In short
- Home purchase mortgage applications fell 2% in a week.
- Applications were 19% lower than a year earlier.
- Borrowers are increasingly choosing adjustable-rate mortgages.
Explained simply
Mortgage rates affect how much borrowers pay each month, and even small changes can alter what homes they can afford. The September rate rise made borrowing more expensive and cooled demand from people looking to buy.
The Mortgage Bankers Association tracks mortgage applications, including requests to buy homes and to refinance existing loans. Buyers can choose a fixed-rate mortgage or an adjustable-rate mortgage, whose rate can change over time; a 5/1 ARM starts with five years at a set rate before annual adjustments.
Fewer applications can point to weaker buyer demand, which matters to sellers, estate agents and the wider housing market. A lower initial ARM rate may reduce early payments, but later changes can make them rise.