Mortgage applications declined once again last week as home financing costs remain near three-year highs, the Mortgage Bankers Association said Wednesday.

The MBA’s Market Composite Index, which tracks mortgage application volumes, declined 2.7% on a seasonally adjusted basis over the week ending Oct. 9.

Purchase application activity, which has not posted a weekly increase since the end of August, declined 4% last week and landed 16% lower year over the year. Refinance activity was 0.4% lower over the week and 56% below the same week last year.

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“Mortgage applications decreased as rates moved higher last week,” commented Joel Kan, deputy chief economist of the MBA, in the weekly report. The refinance share of overall mortgage demand notched a slight rise to 37.7% of total applications from 37% previously.

Mortgage rates for typical 30-year home loans averaged 7.5% last week compared to 7.49% the previous week, their highest levels since late 2023. Borrowers have responded to the higher rate environment — fueled by inflationary effects of the Iran war and surging government bond yields — by stepping away from the purchase market.

Relief for mortgage lenders is unlikely to emerge anytime soon.

The MBA, which unveiled updated housing finance forecasts at its annual conference in Chicago this week, expects rates to remain above 7% through all of next year, as Scotsman Guide reported. After hovering around 6% to start 2026, mortgage rates have been above 6.5% since mid-May.

For borrowers still transacting, however, higher rates have shifted the product mix for lenders who are taking more applications for non-qualified mortgages, investor-purpose loans and adjustable-rate mortgages. The ARM share of total applications remained at elevated levels around 10.5% last week, their highest level since last October.

Average mortgage rates for 5/1 ARMs, where the loan carries a fixed rate for five years and then adjusts on an annual basis, rose to 6.54% from 6.43% the previous week. That’s approximately a full percentage point lower than typical 30-year rates.

“As a result, borrowers continue to rely more on ARM loans to help lower their monthly payments,” noted Kan.

Application share for mortgages backed by the Federal Housing Administration was unchanged over the week at 16.4%, as average rates for 30-year fixed-rate FHA loans increased to 7.19% from 7.14% the previous week.

Meanwhile, applications for loans backed by the Department of Veterans Affairs edged up to 11.9% from 11.8%.