According to HousingWire, mortgage applications took a step back last week, dropping six percent as interest rates climbed to levels we haven't seen in nearly three years. The Mortgage Bankers Association reported that the thirty-year fixed rate jumped to seven point three percent, marking the sixth week in a row of rate increases. Both refinancing and purchase applications declined, with refinances falling nine percent and new purchase applications down four percent on a seasonally adjusted basis.
The story here is pretty straightforward: higher rates are keeping people on the sidelines. The MBA's deputy chief economist noted that purchase and refinance applications hit their slowest weekly pace since 2025, which tells us that borrowers are pulling back. Government-backed refinances were hit particularly hard, with FHA and VA applications both seeing double-digit decreases during the week.
What's interesting is that we're starting to see borrowers get creative. More people are looking at adjustable-rate mortgages, which are running about eighty basis points cheaper than fixed-rate loans. These ARM loans made up their highest share of applications since October 2025, accounting for about ten percent of all mortgage activity. It seems like some folks are willing to take on that initial rate advantage rather than lock in at today's higher fixed rates.
Beyond just the application numbers, other indicators are flashing warning signs heading into the fourth quarter. The Xactus Mortgage Intent Index, which tracks actual credit-pull activity, fell to its lowest non-holiday reading of the year and sits nearly nineteen percent below where it was a year ago. That's a real measure of borrower interest drying up, and experts are saying the mortgage industry faces significant headwinds as we move forward.
What I am seeing locally here in the Bay Area and East Bay is that this rate environment is creating a very different playing field than what we saw just months ago. Buyers who were thinking about jumping in are definitely hesitating, and sellers are having to get realistic about pricing and terms. The folks who do move forward right now tend to be either those with strong financial positions or those who are facing genuine life circumstances that require a move regardless of market conditions.
