Mortgage Rates 7.49% Push Refinancing to Lowest Since 2025

The bond market selloff is now reaching American homebuyers directly. The Mortgage Bankers Association (MBA) said on Wednesday, October 7, 2026, that the average contract rate on a 30-year fixed mortgage with a conforming balance climbed to 7.49% in the week ending October 2, up from 7.30% a week earlier. Mortgage rates 7.49% mark the highest level in almost three years, and borrowers responded by pulling back: total applications fell 4.2%.

What happened

According to the MBA's weekly survey, the Market Composite Index, which measures loan application volume, fell 4.2% on a seasonally adjusted basis. The Refinance Index dropped 8% from the previous week and was 56% lower than a year earlier. The seasonally adjusted Purchase Index fell 2%, and the unadjusted purchase index was 15% below the same week last year.

Rates rose across most loan types. Jumbo 30-year loans, for balances above $832,750, rose to 7.39% from 7.27%. FHA-backed 30-year loans climbed to 7.14% from 6.97%, and 15-year fixed loans rose to 6.71% from 6.56%. Points on the conforming 30-year loan increased to 0.84 from 0.75. Only the 5/1 adjustable-rate mortgage (ARM) moved the other way, slipping to 6.43% from 6.47%.

"Mortgage rates moved to their highest level in almost three years last week, with the 30-year fixed rate reaching 7.49% as both Treasury rates increased and spreads widened with the increase in rate volatility," said Joel Kan, MBA's vice president and deputy chief economist.

The mix of loans shifted slightly. The FHA share of total applications fell to 16.4% from 16.7%, the VA share slipped to 11.8% from 11.9% and the USDA share held at 0.5%. Effective rates, which account for points, increased for every loan type in the survey, including the 5/1 ARM. The MBA's weekly survey has run since 1990 and covers closed-end residential mortgage applications from retail and consumer direct channels.

Why it matters

Mortgage rates 7.49% are about a percentage point higher than a year ago, Kan said, and that gap has largely shut down refinancing. "Very few homeowners have an incentive to refinance at these rates," he said, adding that refinance applications were at their lowest level since 2025 and less than half of last year's pace. The refinance share of total applications fell to 37.0% from 38.3%.

Buyers are feeling it too. Purchase activity fell across all loan types, Kan said, with FHA purchase applications dropping the most, down 6%, "as these higher rates add to ongoing affordability challenges for many homebuyers."

Some borrowers are looking for workarounds. The ARM share of applications held at 10.3%, which Kan said reflects a higher share of borrowers choosing adjustable loans to lower their initial payments. That trade-off carries risk if rates stay high when the fixed period ends.

Other indicators point the same way. HousingWire reported that the Xactus Mortgage Intent Index, based on credit-pull activity, fell about 5.7% week over week to 102.7 and was roughly 21% lower than a year earlier. Xactus chief strategy officer Thomas Lloyd said a meaningful near-term rebound in mortgage intent is unlikely, given elevated rates and seasonal declines in the fourth quarter.

The driver is the bond market. Mortgage rates track longer-term Treasury yields, which reached their highest since 2002 this week, as we covered in our report on Treasury yields. The 10-year yield touched 5.365% on Wednesday, its highest since April 2002, Invezz reported, and housing stocks fell 2.3% while homebuilders declined 2.9% as higher yields pushed mortgage rates up.

Kan's comment points to a second factor beyond Treasury yields: wider spreads. Lenders and mortgage investors demand extra compensation when rates swing sharply, so the gap between mortgage rates and government bond yields tends to grow in volatile weeks. That means mortgage costs can rise faster than the 10-year yield alone would suggest.

What's next

This week's data will capture borrowing costs after the 10-year yield climbed above 5.35% on Wednesday, so there is little sign of relief yet. The next moves depend on inflation, oil prices and the Federal Reserve. A softer economic picture, like the one suggested by the September jobs report, could ease yields, while further oil gains could push them higher.

For households, mortgage rates 7.49% mean higher monthly payments on new loans and fewer chances to refinance. Watch next Wednesday's MBA release, and the gap between mortgage rates and Treasury yields, which Kan said had widened as rate volatility increased.