Weekly Mortgage Demand Falls Despite First Interest Rate Drop in 2 Months

12:20 PM EDT, 10/21/2026 (MT Newswires) -- Mortgage applications in the US declined last week, despite interest rates dropping for the first time in two months, the Mortgage Bankers Association said Wednesday. The market composite index, which measures loan application volume, fell 5.3% on a seasonally adjusted basis from one week earlier in the week ended Oct. 16. On an unadjusted basis, the index was down 5%. The average interest rate for 30-year fixed mortgages with conforming loan balances of $832,750 or less retreated to 7.41% from 7.5% on a weekly basis. For loan balances higher than that amount, the rate dropped to 7.33% from 7.49%. For 15-year loans, the rate slipped to 6.73% from 6.87% week to week. "Mortgage rates decreased for the first time in over two months," MBA Deputy Chief Economist Joel Kan said. "However, lower rates were not enough to boost application activity, as both purchase and refinance applications continued to decline." The purchase index fell 7% on both adjusted and unadjusted bases from a week earlier, while the refinance measure declined 2% from a week ago "Purchase applications fell 18% behind last year's pace, as higher rates are pricing buyers out of the market," Kan said. "It is very clear that the higher mortgage rate environment has cooled the housing market this fall." On Tuesday, official data showed that housing starts dropped to a four-month low in September amid declines in both single and multi-family units, while permits continued to trend downwards. Pending home sales declined 7.3% sequentially last month, according to a separate report by the National Association of Realtors. "Market conditions weakened in September due to fast-rising mortgage rates," NAR Chief Economist Lawrence Yun said Tuesday. "Although job growth and income gains can support home purchases, housing affordability is more affected by changes in mortgage rates." The National Association of Home Builders and Wells Fargo said earlier in the week that homebuilder confidence in the US slumped to a 14-year low in October, amid rising mortgage rates and energy and material costs.