Borrowers looking to purchase or refinance their homes continue to sit on the sidelines, hesitant to make a move as mortgage rates sailed past the seven-percent mark and arrived at their highest level in almost three years–at one point hitting 7.49% last week.
The latest Market Composite Index from the Mortgage Bankers Association (MBA)—its measure of mortgage loan activity volume and includes purchases and refinances—shows mortgage application activity decreasing 4.2% on a seasonally adjusted basis after last week’s 6.0% decrease. On an unadjusted basis, the Index decreased 4% compared with the previous week.
The ongoing pullback comes as the average 30-year mortgage rate landed on 7.28% this past week, according to Freddie Mac. The average 30-year fixed mortgage rate was sitting at 7.63% as of this writing, likely keeping application activity at bay for the week ahead as well.
“Mortgage rates moved to their highest level in almost three years last week, with the 30-year fixed rate reaching 7.49 percent as both Treasury rates increased and spreads widened with the increase in rate volatility,” said Joel Kan, CMB, MBA’s vice president and deputy chief economist. “Very few homeowners have an incentive to refinance at these rates, and the jump in borrowing costs has caused many potential borrowers to step back from the purchase market.
MBA’s Refinance Index saw an 8% decrease from the previous week and was a notable 56% lower than the same week one year ago. MBA’s seasonally adjusted Purchase Index–its weekly measurement of nationwide home loan applications based on a sample of about 75% of U.S. mortgage activity–decreased 2% from one week earlier. The unadjusted Purchase Index decreased 2% compared with the previous week and was 15% lower than the same week one year ago, according to the report.
The refinance share of mortgage activity decreased to 37.0% from 38.3% the previous week, MBA reported. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 10.3% of total applications, reflecting MBA’s expectations that ARMs are becoming a more popular option for buyers, Kan noted.
“With rates roughly a percentage point higher than a year ago, refinance applications last week were at the lowest level since 2025 and fell to less than half of last year’s pace,” Kan stated, adding, “Purchase activity decreased across all loan types with FHA purchase applications falling the most, declining 6 percent, as these higher rates add to ongoing affordability challenges for many homebuyers. As noted in recent weeks, a higher share of borrowers are opting for ARMs to lower their initial payments, with the ARM share steady at 10.3 percent last week.”
For government-backed loans, this week’s report showed the FHA share of total applications decreased to 16.4% from 16.7% the week prior. The VA share of total applications decreased to 11.8% from 11.9% the week prior, and the USDA share of total applications remained unchanged at 0.5% from the week prior.
To view the full report, click here.
