US mortgage rates reach nearly three-year high as applications fall 4.2%

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $832,750 or less rose to 7.49% last week from 7.30%, according to the Mortgage Bankers Association's seasonally adjusted index. Points, which include the origination fee, increased to 0.84 from 0.75 for loans with a 20% down payment. CNBC reported mortgage rates last week rose to their highest level in nearly three years.

Total mortgage application volume dropped 4.2% compared with the previous week, the MBA index showed. Refinance applications fell 8% for the week and were 56% lower than the same week one year ago. Purchase applications declined 2% for the week and were 15% lower than a year ago.

Joel Kan, an economist at the MBA, said in a release that "very few homeowners have an incentive to refinance at these rates." He said refinance applications were at their lowest level since 2025 and less than half of last year's pace, with rates roughly a percentage point higher than a year ago. Kan said purchase activity decreased across all loan types, with FHA purchase applications falling the most at 6%, as higher rates add to affordability challenges for many homebuyers.

Kan said a higher share of borrowers are opting for adjustable-rate mortgages to lower their initial payments, with the ARM share steady at 10.3% last week. CNBC reported adjustable mortgages offer lower interest rates but can adjust in either direction after their fixed terms, which is why they are considered riskier. CNBC reported the ARM share was below 3% in the first years of the pandemic, when fixed mortgage rates hit multiple record lows.

A separate survey from Mortgage News Daily showed rates pulled back slightly this week to 7.56% for the average lender, according to CNBC. CNBC reported the levels remain near the highest since 2003 but are near the lowest in just over a week. Matthew Graham, chief operating officer at Mortgage News Daily, said it was too soon to conclude that recent upward momentum was starting to wane. He said it was "somewhat encouraging that Monday's long-term high was basically right in line with the high seen on September 30th."