Mortgage rates are easing slightly, but homebuyers are retreating

Prospective buyers depart an open house in Rancho Cucamonga, California, US, on Saturday, May 9, 2026. Kyle Grillot | Bloomberg | Getty Images Mortgage rates finally eased a bit last week, but it was not enough to light a fire under demand. Total mortgage application volume dropped 2.5% compared with the previous week according to the Mortgage Bankers Association's seasonally adjusted index. The week's results include an additional adjustment for the Memorial Day holiday. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $832,750 or less, decreased to 6.57% from 6.65%, with points increasing to 0.67 from 0.65, including the origination fee, for loans with a 20% down payment. "The prospect of easing energy prices given the evolving situation in the Middle East brought mortgage rates slightly lower last week," said Joel Kan, MBA's vice president and deputy chief economist. "The 5-year ARM rate inched up slightly, reflecting a flattening yield curve, as short-term rates are at risk of increasing while longer-term rates have dropped." Applications for a mortgage to purchase a home dropped 3% for the week to the slowest pace since April. Demand was 7% higher than the same week one year ago, when mortgage rates were 35 basis points higher. Get Property Play directly to your inbox CNBC's Property Play with Diana Olick covers new and evolving opportunities for the real estate investor, delivered weekly to your inbox. …