Mortgage Interest Rates

Mortgage application activity slowed in July 2026, declining 6.6% from the previous month, according to the Mortgage Bankers Association’s (MBA) Market Composite Index. Compared to a year ago, total mortgage applications declined 1.5%, the first year-over-year decline in two years.

The month-to-month decline occurred in both major components:

• Purchase applications decreased 6.4% (down 2.4% YoY)
• Refinance applications declined 7.2% (down 0.1% YoY)

The slowdown coincided with higher borrowing costs — largely stemming from the uncertainty surrounding the conflict in Iran — as the average contract rate for a 30-year fixed-rate mortgage rose to 6.54%. Nonetheless, the rate remains lower than it was a year ago (6.72%).

Trends by Loan Type

Applications for adjustable-rate mortgages (ARMs) and fixed-rate mortgages (FRMs) in July 2026 decreased 12.5% and 6.1%, respectively, month-over-month. Compared with a year earlier, ARM application volume was unchanged, while FRM applications declined 1.6%.

ARMs, including both purchase and refinance loans, accounted for 7.7% of total applications on a non-seasonally adjusted basis in July. This was 0.5 percentage points lower than in June 2026 and 0.1 percentage points higher than the share recorded a year earlier. The average contract interest rate for 5/1 ARMs was 5.9% in July.

Interest Rate Outlook

The 10-year Treasury yield, a key benchmark for long-term borrowing, rose 10 bps to an average of 4.58% in July as renewed attacks in the Strait of Hormuz heightened concerns about energy supplies and inflation. The yield rose sharply, ending July at 4.67%, 23 bps above its June closing level.

The Iran conflict is constraining the global oil supply and fueling inflation concerns among policymakers. At its July meeting, the Federal Reserve held the federal funds rate within its target range of 3.50% to 3.75%. It marked the Fed’s fifth consecutive rate hold, following 75 basis points of cuts at the end of 2025.

Faced with stubbornly high home prices and elevated interest rates, many would-be buyers continue to stay on the sidelines until housing affordability conditions improve.