While mortgage rates and applications changed little last week, home-purchase applications retreated and were lower than last year’s pace, signaling to economists that continuing affordability challenges and economic uncertainty remain in place for price-sensitive buyers.
The latest Market Composite Index from the Mortgage Bankers Association (MBA)—its measure of mortgage loan activity volume and includes purchases and refinances—shows mortgage application activity decreasing 0.4% on a seasonally adjusted basis after last week’s outlier 3.6% increase. The previous five weeks before that saw consistent decreases. On an unadjusted basis, the Index increased 1% compared with the previous week.
The decrease comes as the average 30-year mortgage rate hit 6.77% last week, elevated but still lower than its recent annual high of 6.81%. The average sits at 6.72% as of this writing.
“Mortgage rates and applications changed little last week, with just a slight increase in refinances for conventional and VA loans, while FHA refinances were lower,” said Joel Kan, CMB, MBA’s VP and deputy chief economist. “Borrowers with larger loan sizes remain less likely to refinance with rates at these higher levels. The average loan size on refinances continues to shrink, dipping to $282,200 last week, the lowest level since June 2025.”
A recent “Housing Alignment” report by listings portal giant Realtor.com that examined several metrics including its own views per property by price segment, showed a more balanced U.S. housing market but with a closer examination revealing “clear K-shaped dynamics in today’s housing market,” referring to an economy where two elements are heading in opposite directions—usually focused on different income levels.
According to that report, price-sensitive homebuyers are being almost entirely priced out of the market as evident by decreases in online home-shopping traffic. The percentage of online home-shopping traffic for starter homes—homes priced below $370,000—has dropped by 11.4% since 2021, going down to 42.6% in 2026.
“This divergence suggests a market bifurcated by buyer financial capacity: luxury shoppers remain financially solid enough to stay actively engaged, while price-sensitive shoppers have become increasingly priced out and disengaged,” the report stated.
Another recent Realtor.com report examined cash buyers and found they are pulling back faster than the market as a whole: Total home sales fell 8.5% year over year, but the number of cash sales fell 11.2% as the pool of cash buyers shrinks, the report stated.
However Realtor.com Senior Economist Hannah Jones noted that while data finds cash buyers are pulling back, positive changes in market dynamics like increasing inventory and moderating prices are allowing more financed buyers to compete.
“Cash buyers aren’t disappearing; they’re simply becoming less dominant as the housing market finds its footing,” said Jones. “Cash still matters, but today its biggest advantage isn’t just winning bidding wars. It’s also giving sellers confidence that a deal will close quickly and with fewer surprises.”
As for this week’s mortgage application report, there was a slight increase to MBA’s Refinance Index of 2% from the previous week and was 18% lower than the same week one year ago. MBA’s seasonally adjusted Purchase Index–its weekly measurement of nationwide home loan applications based on a sample of about 75% of U.S. mortgage activity–increased 3% from one week earlier. The unadjusted Purchase Index decreased 2% compared with the previous week and was 3% lower than the same week one year ago, according to the report.
The refinance share of mortgage activity increased to 41.9% of total applications from 40.7% the previous week, MBA reported. The adjustable-rate mortgage (ARM) share of activity decreased to 7.7% of total applications.
“Purchase applications decreased and were also lower than last year’s pace,” noted Kan. “In addition to the economic uncertainty, affordability difficulties have reemerged as a reason for homebuyers to delay purchase decisions given the impact of higher mortgage rates on monthly mortgage payments.”
For government-backed loans, this week’s report showed the FHA share of total applications decreased to 17.1% from 17.3% from the week prior. The VA share of total applications increased to 12^% from 12.3% the week prior, and the USDA share of total applications remained unchanged at 0.5% from the week prior.
To view the full report, click here.
