Refinance activity climbed, but other demand slipped amid shifting rates
United States mortgage applications edged down for the fourth straight week, even as falling rates spurred a notable jump in refinancing, according to the latest data from the Mortgage Bankers Association (MBA).
The MBA’s Market Composite Index, which measures total mortgage application volume, slipped 0.3% on a seasonally adjusted basis for the week ending October 17, 2025. On an unadjusted basis, the index dipped 0.2%.
The decrease was driven by a 5% drop in purchase applications, which was not fully offset by a 4% increase in refinance activity.
“The lowest mortgage rates in a month spurred an increase in refinance activity, including another pickup in ARM applications,” Joel Kan, MBA’s vice president and deputy chief economist, said.
US mortgage rates slipped for the second consecutive week, with the average 30-year fixed-rate mortgage (FRM) falling to 6.27% as of October 16, 2025, according to Freddie Mac’s latest Primary Mortgage Market Survey.
Refinance demand, which is highly sensitive to rate changes, soared 81% above the same week last year.
“The refinance index increased 4%, driven by a 6% increase in conventional refinances and a 12% increase in FHA refinance applications, as borrowers remain attentive to these opportunities to lower their monthly mortgage payment. VA refinances bucked the trend and were down 12%,” Kan said.
The refinance share of total mortgage activity rose to 55.9%, up from 53.6% the previous week.
This uptick in refis can help offset softening purchase demand, providing short-term volume stability for originators and servicers. However, heavy reliance on refis is historically volatile, as it’s highly sensitive to rate fluctuations and can evaporate quickly if rates rise again.
Mortgage brokers, too, are keeping their eye on that refi surge as rates move lower. Yury Shraybman, founder of Innovative Mortgage Brokers in Pennsylvania, told Mortgage Professional America refinance business had fallen significantly during the rate spike of 2023 and 2024 – but that it was now rebounding strongly.
“I feel that it’s spiking back up. So I expect it to be a big part of the business in the near future as well,” he said. “And people are refinancing for different reasons. Some people are lowering their interest rate because their rate was high. Some people are shorter-term loans. Some people are doing debt consolidation, pulling cash out and things like that.”
ARM activity picks up as buyers seek affordability
Adjustable-rate mortgage (ARM) applications jumped 16% over the week, pushing the ARM share to 11%.
“ARM applications increased 16% over the week, which pushed the ARM share to 11%, with the ARM rate more than 80 basis points lower than the 30-year fixed rate,” Kan said.
Typically, ARM demand rises when rates climb, but this week’s increase points to affordability challenges in a high-price market, as buyers look for ways to manage monthly payments.
For lenders, this means adjusting product offerings, underwriting standards, and risk management practices to accommodate a more diverse mix of loans.
Purchase applications, while down for the week, remained 20% higher than a year ago. Some buyers are waiting for further rate drops, while others are responding to a slight increase in housing supply and softening prices in select markets.
Meanwhile, MBA recently projected that single-family mortgage originations will climb to $2.2 trillion in 2026, up from $2.0 trillion expected this year, as the industry braces for a year shaped by shifting rates, evolving affordability, and regional disparities in home prices.
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