Mortgage application activity decreases despite lower rates

The lowest interest rates in months couldn't bring an influx of borrowers to the table in the run-up to Labor Day, as application volume declined for the third straight week, the Mortgage Bankers Association said.  

The MBA's Market Composite Index, a measure of weekly application volume based on a survey of association members, dropped a seasonally adjusted 1.2% from seven days earlier. The latest pullback comes after falls of 1.4% and 0.5% over the prior two survey periods. 

Diminished volumes appeared despite the lowest mortgage rates since April. The conforming 30-year rate dropped to an average of 6.64% as of last Friday, 5 basis points lower from the prior survey period, according to the survey.  

"However, that was not enough to spark more application activity," said Joel Kan, the trade group's vice president and deputy chief economist, in a press release.

While application activity slowed on an overall basis, promising pockets of activity showed up in the data with the Refinance Index inching up 0.9% week over week. Refinance activity also ran 16.1% higher from four weeks earlier and 20.1% from a year ago. Applications picked up thanks to a surge of interest from borrowers with Federal Housing Administration- and Department of Veterans Affairs-backed loans. 

"The FHA rate is averaging about 30 basis points lower than the conventional rate in 2025, which has made those loans relatively more appealing to eligible borrowers," Kan said.

The refi share of activity grew to 46.9% relative to total applications up from 45.3% seven days earlier. 

A drop in the purchases offset refinance activity, however. The MBA's Purchase Index fell a seasonally adjusted 3.1% from the prior week but came in 16.6% higher year over year. The decline was the first after four straight weeks of increases. 

Refis lead to more government-backed lending

Due in part to demand for refinances, government-backed activity picked up by 2.7% from the prior weekly survey, while the federally guaranteed segment also gained greater market share.

FHA-backed applications garnered a 19.9% share of total volume, up from 19.1%, while VA-guaranteed loans grew to 13.8% from 13.3%. The portion of mortgage applications coming through the U.S. Department of Agriculture remained at 0.5% week over week. 

Adjustable-rate mortgages, or ARMs, meanwhile, accounted for 8.8% of all applications compared to 8.4% over the previous seven-day period. 

The overall pace of pre-holiday borrowing slowed despite favorable interest rate trends that brought in a wave of borrowers earlier in the summer. In addition to the decrease of the conforming average, interest rates fell across all other loan types tracked by MBA.

• The 30-year jumbo average dropped 9 basis points to 6.58% from 6.67% in the prior survey.

• The mean 30-year FHA-backed contract fixed rate came in at 6.31%, a 4 basis point drop from 6.35% one week earlier. 

• The 15-year fixed rate average saw the biggest fall of 19 basis points to 5.84%. Seven days earlier, it averaged 6.03%. 

• The average contract rate for the 5-year ARM, which starts out with a fixed 60-month term, came in at 5.9% compared to 5.94% in the prior survey.