Mortgage applications fell 6.6% in July from June on a seasonally adjusted basis, according to the Mortgage Bankers Association’s monthly composite data, as the average rate on a 30-year fixed mortgage rose 11 basis points to 6.70% during the month.
The decline marked the first year-over-year drop in mortgage applications in two years, with volume down 1.5% from July 2025, according to an analysis published by the National Association of Home Builders’ Eye on Housing using MBA’s monthly application data. The figures are separate from MBA’s weekly applications survey, which tracks week-to-week swings in loan volume; the monthly composite smooths those figures to show the broader trend across the month.
Fixed-rate and adjustable-rate loans both declined
Applications for fixed-rate mortgages (FRMs) fell 6.1% month over month and were down 1.6% from a year earlier. Adjustable-rate mortgage (ARM) applications fell more sharply, down 12.5% for the month, though they were unchanged from July 2025. ARMs made up 7.7% of total applications in July, with the average rate on a 5/1 ARM at 5.9% β nearly a full percentage point below the 30-year fixed rate, a gap that has kept a small but steady share of borrowers opting for adjustable products despite their long-term rate risk.
Average loan sizes also shrank across the board. The overall average loan size fell 2.5% to $383,600. Purchase loan sizes declined 2.6% to $444,600, while the average refinance loan size fell 2.2% to $296,000 β a pattern consistent with buyers and homeowners borrowing smaller amounts as higher rates squeeze what they can afford to finance.
What it means
Verified facts: MBA’s monthly data, as compiled by NAHB, shows total mortgage applications down 6.6% month over month and 1.5% year over year in July, with the 30-year fixed rate rising to 6.70%. Both FRM and ARM applications declined for the month, and average loan sizes for purchase and refinance loans both shrank.
RealtyWire analysis: The year-over-year decline β the first in two years β is a notable inflection point. Application volume had been running above year-ago levels for much of the past two years even as rates stayed elevated, suggesting pent-up demand was still working its way into the market. July’s reversal suggests that dynamic may be fading as rates hold near their highest levels of 2026, a trend RealtyWire has tracked in recent weekly MBA data showing applications falling as rates hit multi-year highs.
The shrinking average loan sizes point in the same direction: rather than pulling out of the market entirely, many prospective borrowers appear to be adjusting down β buying less expensive homes, borrowing smaller amounts, or leaning more on adjustable-rate products to manage monthly payments. That’s a different response than an outright pullback, and one that could show up in coming months as softer price appreciation in markets where affordability is most stretched.
The divergence between FRM and ARM demand is also worth watching. ARM applications fell more than twice as fast as fixed-rate applications in July even though ARM rates held a meaningful discount to 30-year fixed pricing β a sign that many borrowers remain wary of adjustable products regardless of the near-term savings, likely reflecting memories of the rate volatility of the past several years.
What to watch
MBA’s weekly applications survey, released every Wednesday, remains the more timely gauge of borrower behavior and will show whether Wednesday’s cooler-than-fear July CPI reading translates into any near-term rate relief. RealtyWire has covered the inflation data’s potential to move mortgage rates this week, with the Federal Reserve’s September 16 meeting seen as a close call between holding rates and cutting.
