Mortgage Applications Decline Amid Rising Interest Rates

Mortgage applications experienced a decline this week as interest rates edged upward, influenced by geopolitical tensions in the Middle East, trade disputes with Canada, and persistent inflation concerns. For the week concluding August 26, the Mortgage Bankers Association's (MBA) Market Composite Index, which gauges total mortgage loan application volume, decreased by 1% on a seasonally adjusted basis compared to the previous week. This figure also represents a 5% year-over-year decrease. The Purchase Index, considered a leading indicator for future home sales, saw a 0.3% week-over-week reduction on a seasonally adjusted basis, and is down 5% from its level a year ago. Refinance activity also contracted, falling 2% over the week and 17% annually.

Joel Kan, MBA's vice president and deputy chief economist, attributed this downward trend primarily to escalating interest rates. He noted that purchase activity was negatively affected by a significant 7% decrease in FHA applications. Kan further elaborated that the purchase market has been slowing for the past two months, with applications now trailing last year's pace by 5%. The rise in mortgage rates also contributed to a slowdown in refinancing. Kan stated that refinance applications decreased, with a particular impact on FHA and VA loans, and that the average loan size for refinances reached its lowest point since June 2025.

According to the MBA's measurement, the 30-year fixed-rate mortgage rate increased to 6.78% from 6.77% in the preceding week. In parallel, Freddie Mac reported that 30-year fixed mortgage rates averaged 6.65% for the week ending August 20, a slight decrease from the previous week's high of 6.67%, but an increase from the 6.58% recorded at the same time last year. The 15-year fixed mortgage rate stood at 5.95%, down from 5.96% the prior week but higher than the 5.69% average from a year ago. These elevated interest rates are demonstrably dampening buyer demand, as evidenced by a 2.3% month-over-month decrease in pending home sales in July, and a 2.2% year-over-year decline, according to the National Association of Realtors' report last week. Lawrence Yun, Chief Economist at the National Association of Realtors, commented that the highest mortgage rates of the year occurred during the peak summer buying season, which has consequently led to a reduction in contract signings.