Mortgage applications charged ahead last week as mortgage rates dropped to their lowest levels in nearly a year, sparking a rush in refinance activity and lifting overall demand, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending Sept. 12, 2025.
The MBA’s Market Composite Index, which tracks total application volume, increased 29.7% on a seasonally adjusted basis from the prior week. On an unadjusted basis, the Index rose 43%.
Application Activity
- Refinance Index: Up 58% from the previous week; 70% higher than the same week one year ago.
- Purchase Index (seasonally adjusted): Up 3% from the week prior.
- Purchase Index (unadjusted): Up 12% from the prior week; 20% higher than last year.
“Indicative of the weakening job market, and in anticipation of a rate cut from the Federal Reserve, mortgage rates last week dropped to their lowest level since last October, with the 30-year fixed rate declining to 6.39%,” said Mike Fratantoni, senior vice president and chief economist at the MBA. “Homeowners responded swiftly, with refinance application volume jumping almost 60 percent compared to the prior week.”
Fratantoni noted the average loan size on refinances reached its highest level in the survey’s 35-year history, suggesting that borrowers with larger balances were quickest to take advantage of the drop. “Almost 60% of applications were for refinances, but there was also a pickup in purchase applications,” he added.
ARMs On The Rise
MBA highlighted growing borrower interest in adjustable-rate mortgages (ARMs).
The ARM share rose to 12.9% of total applications, the highest level since 2008. “Even as 30-year fixed rates reached their lowest level in almost a year, more borrowers, and particularly more refinance borrowers, opted for adjustable-rate loans,” Fratantoni said.
“Notably, ARMs typically have initial fixed terms of five, seven, or 10 years, so those loans do not pose the risk of early payment shock that pre-2008 ARMs did. Borrowers who do opt for an ARM are seeing rates about 75 basis points lower than for 30-year fixed rate loans.”
Loan Type Share of Applications
- Refinance share: 59.8% (up from 48.8%)
- FHA share: 16.3% (down from 18.5%)
- VA share: 15.8% (up from 15.3%)
- USDA share: 0.5% (down from 0.6%)
Average Contract Interest Rates
- 30-year fixed (≤ $806,500): 6.39% (down from 6.49%), points 0.54
- 30-year fixed (jumbo > $806,500): 6.48% (up from 6.44%), points 0.35
- FHA 30-year fixed: 6.14% (down from 6.27%), points 0.68
- 15-year fixed: 5.63% (down from 5.70%), points 0.58
- 5/1 ARM: 5.65% (down from 5.77%), points 0.41
The surge underscores how quickly borrowers respond to meaningful rate moves. For loan officers and brokers, the combination of lower fixed rates and competitive ARM pricing opens doors to both refinance outreach and purchase market re-engagement.
With the Fed widely expected to cut rates this week, market momentum may continue — but competition for rate-sensitive borrowers is likely to intensify.
