Fewer Americans applied for a mortgage last week – and the government shutdown has thrown more uncertainty on the economic outlook
Mortgage applications dropped sharply across the US last week as interest rates climbed to their highest point in three weeks, while Wednesday's federal government shutdown has ramped up job loss fears among federal workers and cast more uncertainty on the housing outlook.
The Mortgage Bankers Association’s (MBA) latest Weekly Mortgage Applications Survey showed the Market Composite Index, which tracks mortgage loan application volume, fell 12.7% on a seasonally adjusted basis for the week ending September 26, 2025. On an unadjusted basis, the index was down 13% from the previous week.
Refinance activity led the decline, with the Refinance Index sliding 21% week-over-week, even as it remained 16% higher than the same period last year.
The MBA attributed the drop to a reversal in mortgage rates after a period of heightened refinancing activity.
“Mortgage rates increased to their highest level in three weeks as Treasury yields pushed higher on recent, stronger than expected economic data. After the burst in refinancing activity over the past month, this reversal in mortgage rates led to a sizeable drop in refinance applications, consistent with our view that refinance opportunities this year will be short-lived,” Joel Kan, MBA’s vice president and deputy chief economist, said.
The government shutdown, which arrived Wednesday morning after lawmakers failed to reach a deal on continued funding, has raised fears in Washington, DC that thousands of jobs could be on the line with President Trump threatening to fire federal workers who would usually be furloughed.
The prospect of big federal job cuts could weigh against the housing market outlook, particularly in DC where home listings saw a big spike earlier in the year after a swathe of firings by the Department of Government Efficiency (DOGE).
But 10-year Treasury yields, a key driver of US mortgage rates, slipped overnight and had fallen by about six basis points since the early morning at time of writing. That could be good news for Americans hoping rates will fall in the next couple of weeks.
Kan noted that last week, the 30-year fixed rate hit 6.46%, driving refinance activity down across all loan types.
“Refinance activity declined for all loan types, including a 22% decrease in conventional refinances and 27% decrease in VA refinances. The average loan size for refinances dropped to $380,100 from $461,300 two weeks ago as these higher rates eliminated the refinance incentive for many borrowers with large loans,” Kan said.
Purchase applications also edged lower, with the seasonally adjusted Purchase Index down 1% from the previous week.
“Purchase applications were down slightly over the week after three consecutive increases, but the strength of the purchase market has also been impacted by other factors such as broader economic conditions, the health of the job market, and housing inventory,” Kan said.
Refinance share of total applications fell to 55% from 60.2% the prior week, while the adjustable-rate mortgage (ARM) share slipped to 8.4%.
The FHA share of applications rose to 16.8%, the VA share dropped to 16.2%, and the USDA share held steady at 0.4%.
Average contract interest rates climbed across all major mortgage products, with 30-year fixed jumbo loans reaching 6.54% and FHA-backed loans at 6.24%. The 15-year fixed rate rose to 5.76%, and 5/1 ARMs increased to 5.74%.
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