Rate pressures bite mortgage shoppers, pushing purchase and refinance appetite lower
Purchase and refinance applications plunged last week compared with the same time last year as rising interest rates, bond market chaos and economic jitters pushed mortgage shoppers to the sidelines.
Homebuyer demand for mortgages was 19% lower than the same week in 2025, according to the Mortgage Bankers Association’s (MBA) unadjusted Purchase Index, while its unadjusted Refinance Index nosedived by 65% as upward pressure on mortgage rates continued.
The average 30-year fixed rate surged, jumping to 6.97% and inching perilously close to the 7% mark many mortgage professionals say could significantly dim purchase demand.
Rates have spiked amid growing bond market unease about the potential impact of oil prices on inflation. Expectations of a Federal Reserve interest rate hike at its next announcement, scheduled for this afternoon, have also soared.
On a seasonally adjusted basis, the MBA’s Market Composite Index – which measures all mortgage loan applications – was down by 4.1% week over week, while the unadjusted Index slid by 15%.
Joel Kan, vice president and deputy chief economist at the MBA, said the latest 30-year fixed rate marked its highest level since May of last year.
“After adjusting for the Labor Day holiday, purchase applications dipped relative to the week prior as higher mortgage rates caused many buyers to pause their purchase decisions,” he said. “The current level of rates also eliminated much of the benefit to refinance for many borrowers, resulting in declines in conventional, FHA and VA refinance applications.”
The 10-year Treasury yield, which heavily influences fixed mortgage rates, moved above 5% early on Wednesday morning before ticking lower.
That yield has skyrocketed since April, pulling mortgage rates up with it, and its rise appears to be having a clear impact on the mortgage market.
Yesterday, the MBA said mortgage applications for new home purchases hit a new 2026 low last month – and existing home sales also slowed in August, according to the National Association of Realtors (NAR), falling by 2% month over month and by 1.2% compared with the same time last year.
The MBA said the refinance share of mortgage activity fell to 39.4% last week, down from 40.9%, while the adjustable-rate mortgage (ARM) share decreased to 8.4%. The FHA share of total applications fell to 16.9% from 17.2%, and the VA share of total applications was up by 0.4%, to 12.4%.
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