The Mortgage Bankers Association (MBA) reported that mortgage rates decreased as 2025 ended and 2026 began, but this did not increase demand in the mortgage market.
For the week ended January 2, 2026, total mortgage application volume fell 9.7% on a seasonally adjusted basis from the previous two weeks.
During this two-week period, the average contract interest rate for 30-year fixed-rate mortgages decreased to 6.25% from 6.32%. This is the lowest level since September 2024. Points also dropped to 0.57 from 0.59, which includes the origination fee for loans with a 20% down payment.
Despite lower rates, applications to refinance a home loan fell by 14% over the two-week period. However, refinance applications were still 133% higher than the same week one year ago.
Applications for mortgages to purchase homes also fell, declining by 6% from two weeks earlier, although they were still 10% higher compared to the same week last year. The average loan size for mortgages was reported at $408,700, the smallest amount seen in a year.
This drop in average loan size was driven by lower loan sizes across both conventional and government loan types, as noted by Joel Kan, an economist at the MBA.
As mortgage rates fell, demand for adjustable-rate mortgages (ARMs) also decreased. The ARM share of total applications dropped to 6.3% of all mortgage applications.
Fixed interest rates remain lower, making ARMs less appealing despite offering lower rates coupled with higher risks.
Mortgage rates have remained stable at the beginning of this week, according to a separate survey from Mortgage News Daily. With little economic data available to influence the rates, this trend may change soon.
Economic reports on labor markets and the ISM service sector are set to be released, which could impact rates. Matthew Graham, the chief operating officer of Mortgage News Daily, stated that if the upcoming data is stronger, it could lead to higher rates, while weaker data might push rates lower.