Mortgage Rates Continue to Fall, But Purchase Applications Retreat

Mortgage applications fell last week, even as interest rates on home loans declined for the third week in a row, giving buyers some relief.

For the week ending Oct. 30 the Mortgage Bankers Association's Market Composite Index—a measure of total mortgage loan application volume—decreased 1.2% 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 2% from one week earlier after seasonal adjustment. Purchase applications were down 19% from a year ago.

According to MBA calculations, the average contract interest rate for 30-year fixed mortgages with conforming loan balances is 7.3%, a slight decrease from last week's rate of 7.37%. Rates averaged 6.17% a year ago.

Mortgage rates dropped to 7.24% last week from 7.32% the week before, according to a separate survey from Freddie Mac.

"Mortgage rates drifted down to their lowest level since September 2026 last week in the wake of the Federal Reserve’s decision to hold on additional rate hikes at its October meeting,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “While the 30-year rate declined to 7.3%, activity is still quite slow, with purchase application volume down for the week and refinance volume effectively flat at a very low level."

As we have highlighted in recent weeks, more borrowers are choosing ARMs in this environment to lower their initial payments, with the ARM share at its highest level since September 2025.”

That's pushed more borrowers to pursue riskier adjustable-rate mortgages. According to Fratantoni, the share of ARM applications is at its highest level since September 2025.

ARM rates are nearly a full percentage point lower than the 30-year fixed mortgage rate, and the share of ARM applications increased week over week from 11.3% to 11.4%.

The share of FHA loan applications decreased to 16% from 16.6% the prior week. The VA share of total applications increased to 11.2% from 11% the prior week. And the USDA share of total applications increased to 0.6% from 0.5% the week prior.

Meanwhile, the refinance share of mortgage activity increased to 39.8% from 38.9% the previous week. Though the overall refinance index increased .1% from the previous week, it was 60% lower than the same week one year ago, as homeowners remain locked into their lower interest rates.

While Federal Reserve Chairman Kevin Warsh and the Federal Open Market Committee opted not to raise rates again last week, rate watchers are looking ahead to December when the Fed meets again to decide on rates.

CME Group's FedWatch has the likelihood of an additional rate hike at just under 80%.

With Democrats wresting control of the House and Senate on Tuesday, voters will be watching to see what economic policies are instituted to help make housing more affordable.

"Many Democrat campaigns tapped into voter dissatisfaction with the economy, a winning strategy in 2026. Democrats have a clear mandate to focus on pocketbook issues, but whether they can translate that into a legislative agenda that delivers on that mandate remains to be seen," said Realtor.com senior economist Jake Krimmel.

"Legislative options are likely to be limited in a divided Washington where a Democratic House and Senate will either need to work with the Republican White House or find enough Republican legislative support to override a likely veto," he added.

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.