Mortgage application activity declined again in May as higher mortgage rates continued to suppress the market, although adjustable-rate mortgages (ARM) gained some traction. According to the Mortgage Bankers Association’s (MBA) Market Composite Index, a measure of total mortgage application volume, applications fell 5.5% month-over-month in May on a seasonally adjusted basis. The decline was driven by refinance activity, which dropped 12.3% over the month, while purchase applications posted a modest 1.8% increase. Compared with a year earlier, however, total mortgage application activity remained 14.2% higher, with refinance applications up 26.4% and purchase applications rising 6.2%. Meanwhile, applications for adjustable-rate mortgages (ARM) rose 3.1% over the month, nudging the ARM share of total applications up to 9.0%.
The average contract rate for a 30-year fixed-rate mortgage increased 13 basis points (bps) to 6.54% in May, as conflict in Iran pushed Treasury yields higher. Nonetheless, the rate remained 36 bps lower than its level a year ago. As borrowing costs moved up, borrowers showed some renewed interest in ARMs, which can offer lower initial rates than fixed-rate loans.
By loan type, applications for ARMs increased 3.0%, while fixed-rate mortgages (FRMs) decreased about 6.1% from the previous month. On a year-over-year basis, applications for FRM and ARMs were up 12.4% and 38.2%, respectively. As of May 2026, ARMs applications, including both purchase and refinance loans, accounted for 9.0% of total applications on a non-seasonally adjusted basis, up 0.7 percentage points from the prior month and 1.5 percentage points a year earlier. The average contract interest rate for 5/1 ARMs was 5.7% in April.
Loan sizes increased across most categories in May, with refinance loans being the main exception. Consequently, the overall average loan size edged up 2.5% to $407,600. The average purchase loan size increased 2.2% to $465,000, while the average refinance loan size declined 1.5% to $321,000. The average ARM loan size edged up, decreasing 1.9% to $937,200.
