FHA loans hit a three-month high as buyers lean on government programs to offset rising rates
Mortgage applications for new home purchases fell to their lowest point of 2026 in August, as rising borrowing costs kept buyers on the sidelines and drove greater reliance on government-backed financing, according to the Mortgage Bankers Association (MBA).
The MBA's Builder Application Survey (BAS) for last month showed applications declined 5.5% from a year earlier and 6% from July, with no adjustment for seasonal patterns.
It marked the fifth consecutive month of annual declines, a sustained pullback that underscores the pressure elevated mortgage rates continue to place on new-home demand.
"Increasing mortgage rates continue to put pressure on new home sales activity," said Joel Kan, CMB, MBA's Vice President and Deputy Chief Economist.
"Applications to purchase newly constucted homes declined in August for the fifth straight month, with the level of applications down to its lowest in 2026."
The average 30-year fixed-rate mortgage climbed to 6.76% for the week ending September 10, its highest level in more than 14 months.
Ten-year Treasury yields, meanwhile, have soared to their highest level since 2007 and expectations of a Federal Reserve interest rate hike are surging, potentially putting further upward pressure on US mortgage rates.
August core CPI rose 0.3%, above economists' forecasts, while market-implied odds of a September rate increase moved sharply higher following the release. The data arrives just days before the Fed's September 15-16 policy meeting.https://t.co/KcxUSSuf36
— Mortgage Professional America Magazine (@MPAMagazineUS) September 11, 2026
Fifth straight month of declining applications
Despite the drop in applications, MBA's estimates of actual sales offered a slightly more encouraging reading.
New single-family home sales are estimated to have run at a seasonally adjusted annual rate of 664,000 units in August, up 2.6% from July's 647,000-unit pace, though still roughly 9% below last year's rate.
On an unadjusted basis, MBA estimates 52,000 new home sales in August, down 3.7% from 54,000 in July.
FHA demand rises as affordability pressure mounts
The product breakdown for August illustrated the degree to which buyers are depending on federal programs to bridge the affordability gap.
FHA loans composed 35.0% of applications, their highest share in three months, as higher mortgage rates pushed more buyers toward federally backed financing.
Conventional loans made up 49.5% of applications, VA loans 13.9%, and RHS/USDA loans 1.7%.
"More homebuyers turned to FHA loans in response to higher mortgage rates, and those loans accounted for 35% of applications, the highest share in three months," Kan said.
The average loan size for new homes edged down from $374,438 in July to $373,194 in August. That compression is consistent with the broader affordability picture: as new home prices have trended lower and the year-over-year gap in new home sales has widened, both buyers and builders are recalibrating expectations.
Nicholas Barta, division president at Security First Financial, told Mortgage Professional America earlier that persistent rate pressure cuts directly into buyer eligibility.
"There's not as many people that will qualify to purchase homes, or they can't qualify to purchase the homes that they want because they qualify at a lower level," Barta said.
With the US housing market remaining subdued throughout 2026 as mortgage rates hover in the mid-6% range, the MBA projects the 30-year fixed rate will stay between 6.1% and 6.3% through the remainder of the year, a trajectory that leaves little room for a meaningful new-construction demand recovery before year-end.
MBA's Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country, providing an early estimate of new home sales volumes at the national, state, and metro level.
Official new home sales data is compiled monthly by the US Census Bureau, where sales are recorded at contract signing, typically coincident with the mortgage application.
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