Mortgage applications drop by 5% despite interest rate decline

On an unadjusted basis, the index fell 6% compared to the previous week.

The refinancing index fell 6% from the previous week and was 110% higher than the same week a year ago. The refinance share of mortgage activity rose to 59.1% of total applications from 59.0% the week before.

The seasonally adjusted purchasing index fell by 4% compared to a week earlier. The unadjusted purchasing index fell by 6% compared to the previous week and was 16%5 higher than the same week a year ago.

“Total mortgage applications fell last week, despite the slight decline in mortgage rates,” said Mike Fratantoni, MBA’s SVP and chief economist. “MBA expects the trends of a weakening labor market, persistent inflation, increased housing inventories and stable mortgage rates to continue into the new year.”

Fratantoni added: “The volume of purchase applications last week was 16% higher than a year earlier. We forecast continued, modest growth in terms of home sales through 2026.”

By product, the share of adjustable-rate mortgages (ARMs) in activity increased to 8.1% of total applications. The Federal Housing Administration The share (FHA) of the total number of applications increased to 20.8% from 19.5% the week before. The The U.S. Department of Veterans Affairs (VA) share of total applications fell to 15.3% from 16.6% the week before, while the US Department of Agriculture (USDA) share of total applications remained unchanged at 0.4% from the previous week.

The average contract rate for 30-year fixed-rate mortgages with conforming loan balances fell from 6.38% to 6.31%, while the rate for 30-year fixed-rate mortgages with large loan balances increased from 6.44% to 6.52%.

The average contract rate for 30-year fixed-rate mortgages backed by the FHA increased from 6.12% to 6.14% and the rate for 15-year fixed-rate mortgages decreased from 5.72% to 5.70%. The average contract rate for 5/1 ARMs increased from 5.63% to 5.79%.

The MBA noted in its report that its offices will be closed from Thursday, December 25, 2025 and will reopen on Friday, January 2, 2026. Due to the closures, results for the weeks ending December 26, 2025 and January 2, 2026 will both be released on Wednesday, January 7, 2026.