Interest rates decreased slightly week over week, but the volume of mortgage applications continued to fall.
Mortgage applications to buy a home fell 18% year over year this week, as the housing market continues to be rocked by inflation, high interest rates, and elevated oil prices due to the ongoing war with Iran.
For the week ending Oct. 9, the Mortgage Bankers Association's Market Composite Index—a measure of total mortgage loan application volume—fell 5.3% on a seasonally adjusted basis from one week earlier.
The Purchase Index, which measures the volume of mortgage applications to purchase a single-family home, decreased 7% from one week earlier after seasonal adjustment. Purchase applications were down 18% from a year ago.
According to MBA calculations, the average contract interest rate for 30-year fixed mortgages with conforming loan balances is 7.41%, a slight decrease from last week's high of 7.5%.
Mortgage rates held steady at 7.4% last week, according to Freddie Mac.
"However, lower rates were not enough to boost application activity, as both purchase and refinance applications continued to decline,” said Joel Kan, MBA’s vice president and deputy chief economist. “It is very clear that the higher mortgage rate environment has cooled the housing market this fall.”
And with elevated inflation levels, it's likely that interest rates will remain high for the foreseeable future, says Realtor.com® senior economist Hannah Jones.
"Mortgage rates are expected to stay elevated after the latest CPI data showed both headline and core inflation picking up," she says. "As a result, markets are pricing in the possibility of another Fed rate hike before the end of the year. Against that backdrop, buyers will likely keep facing tough affordability conditions through year-end, especially as wage growth runs below inflation and further erodes real buying power."
Pending home sales fell 7.3% in September compared to August, and declined 11.3% year over year, hitting an all-time low, according to the National Association of Realtors® Pending Home Sales report released on Tuesday. Pending home sales, or contract signings, mark the first formal step in the homebuying process, and are a good indicator of where home closings will be one to two months later.
Ongoing economic turmoil and elevated interest rates have led Lawrence Yun, the chief economist of the National Association of Realtors®, to revise his earlier predictions about where the housing market will end up this year.
In November 2025, Yun forecasted that existing home sales would rise 14% year over year in 2026, and median prices would increase 4%. In April, he revised his sales forecast down to 4%, but said he still expected prices to climb 5%.
At a conference of Las Vegas realtors this week, Yun further revised his forecast to predict existing-home sales and prices would increase by just 2% at most this year. Regarding newly built homes, he projected new-home sales would decrease by 5% year over year.
In recent weeks, elevated interest rates have pushed more borrowers to pursue adjustable-rate mortgages, which are considered riskier. ARM rates are nearly a full percentage point lower than the 30-year fixed mortgage rate, and the share of ARM applications also held steady week over week at 10.5%.
The share of FHA loan applications decreased to 16.3% from 16.4% from the prior week. The VA share of total applications decreased to 11.5% from 11.9% the prior week. And the USDA share of total applications decreased slightly to 0.5% from 0.6% the prior week.
Meanwhile, the refinance share of mortgage activity increased to 39%, up from 37.7% the previous week, though the overall refinance index decreased 2% from the previous week and was 59% lower than the same week one year ago, as homeowners remain locked into their lower interest rates.
NAR reported that in September, home sales rose 1.5% on a monthly basis, though sales remain down year over year.
One bright spot in the data: In September, first-time home buyers comprised 31% of sales, up from 30% in the prior month and year—a sign that entry-level buyers may be gaining ever-so-slight ground in the market.
How mortgage rates are calculated
Mortgage rates are calculated based on various factors in the economy, and the length of your loan and credit score will also factor into the mortgage rate you qualify for.
The 30-year mortgage rate is tied to the yield of the 10-year Treasury note, because most 30-year mortgages are either paid off or refinanced in roughly eight to 11 years.
That makes the duration on the loans roughly comparable, and mortgage lenders use the 10-year Treasury as a benchmark for setting rates, adding on a risk premium.
Long-term yields for Treasury notes are determined by a number of factors, including the supply of and demand for U.S. government debt, and investor expectations for inflation over the life of the bonds.