Refi Demand Logically Lower While Purchases Grind Sideways

Mortgage demand remained subdued last week as the 30-year fixed rate climbed above 7%. The Mortgage Bankers Association (MBA) reported a 1.5% decline in total mortgage application volume for the week ending September 18, following a 4.1% drop the week before.  Purchase activity was the only saving grace. While technically 1% lower week-over-week, it has generally been moving sideways for the past few weeks.  Refinance demand was more sluggish. The Refinance Index declined another 3% and was 62% lower than a year earlier. MBA said the pace of refinancing has now reached its slowest level since February 2025 , a reflection of how few existing borrowers can benefit from replacing their current mortgage with one carrying today's higher rate. "Mortgage rates vaulted higher last week, with the 30-year fixed rate at 7.12 percent – the highest level since May 2024," said Mike Fratantoni, MBA's SVP and Chief Economist. He added that the higher fixed rates prompted more borrowers to consider adjustable-rate mortgages, even as both purchase and refinance applications continued to decline. The shift toward ARMs was one of the more notable developments in the latest data. ARMs accounted for 9.8% of application volume, up from 8.4% the week before. The average rate for a 5/1 ARM fell to 6.10%, putting it more than a full percentage point below the 30-year fixed rate. That spread is large enough to make the adjustable option more noticeable to borrowers facing 7% or higher fixed rates.