Decline in Mortgage Applications Despite Lower Rates

Mortgage application activity experienced a significant decline at the start of 2026, despite a decrease in mortgage rates. According to data from the Mortgage Bankers Association (MBA) for the two-week period ending January 2, 2026, total mortgage application volume fell by 9.7% on a seasonally adjusted basis compared to two weeks earlier. The unadjusted Market Composite Index also showed a notable decrease, dropping by 28% over the same period.

CNBCMortgage Application Activity Starts 2026 with a WhimperMortgage applications drop 9.7% despite lower rates

During this timeframe, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased to 6.25%, down from 6.32%. This rate is the lowest recorded since September 2024. The refinance index, which reflects applications to refinance existing loans, fell by 14% but remained 133% higher than the same week a year prior. The unadjusted refinance index saw a more substantial decline of 31%, although it was still 108% higher than the previous year.

Mortgage applications drop 9.7% despite lower ratesCNBCMortgage Application Activity Starts 2026 with a Whimper

The share of refinancing in total mortgage activity increased to 56.6%, up from 53.8% the week before. Conversely, the seasonally adjusted purchase index decreased by 6%, while the unadjusted purchase index fell by 23%, although it was still 10% higher than the same week in 2025.

Mortgage Application Activity Starts 2026 with a WhimperMortgage applications drop 9.7% despite lower ratesCNBC

Joel Kan, the MBA’s vice president and deputy chief economist, noted that while refinance applications saw a partial rebound, the overall demand for mortgage applications remained weak. He stated, “FHA refinance applications saw a 19% increase, although that was a partial rebound from a drop the week before.” Kan also indicated that the MBA expects mortgage rates to remain stable around current levels, with potential opportunities for refinancing when rates dip further.

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The average loan size for mortgage applications was reported at $408,700, marking the smallest average in a year. This decrease was attributed to lower average loan sizes across both conventional and government loan types. Additionally, the Federal Housing Administration (FHA) share of total applications rose to 20.0%, while the U.S. Department of Veterans Affairs (VA) share increased to 17.3%. The U.S. Department of Agriculture (USDA) share also saw a slight rise to 0.4%.

Mortgage applications drop 9.7% despite lower rates

Despite the lower mortgage rates, the decline in application volume raises concerns about the overall health of the housing market. Critics argue that the persistent high rates and economic uncertainties may be deterring potential homebuyers. The outlook for the coming weeks remains cautious, with experts monitoring the market for any shifts in consumer behavior as rates fluctuate.

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• “FHA refinance applications saw a 19% increase, although that was a partial rebound from a drop the week before.” — Joel Kan, MBA Vice President and Deputy Chief Economist

Mortgage applications drop 9.7% despite lower rates

• “MBA continues to expect mortgage rates to stay around current levels, with spells of refinance opportunities in the weeks when rates move lower.” — Joel Kan, MBA Vice President and Deputy Chief Economist

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