Mortgage Demand Falls 8.5% as Interest Rates Hit 3-Week High, Refinances Drop Sharply

Mortgage demand fell sharply last week amid rising interest rates, reaching a three-week high. According to the Mortgage Bankers Association (MBA), total mortgage applications decreased by 8.5% compared to the prior week, reflecting sensitivity to rate changes.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan limits climbed to 6.24%, up from 6.16%. Points, including origination fees for loans with a 20% down payment, also edged higher to 0.55 from 0.54, marking the peak in recent weeks.

Refinance applications experienced the largest drop, falling 16% from the previous week. Despite this decline, refinance activity remained 156% above the level seen a year earlier when rates were nearly 0.78 percentage points higher. This indicates that while volume has pulled back, demand is still elevated relative to last year’s conditions.

Joel Kan, MBA’s vice president and deputy chief economist, noted an exception within the refinance segment. FHA refinancing surged due to rates that were about 20 basis points lower than conforming loan rates. This lower cost kept FHA refinancing buoyant despite the overall softening market.

Mortgage applications for home purchases remained almost steady, down just 0.4% week-over-week, yet they were still 18% higher compared to the same week last year. However, homebuyers continue to face high costs, with most new supply concentrated in higher-priced properties. The average loan size remained at its highest point since September of last year.

A contrasting data point comes from Mortgage News Daily, which reported a slight dip in mortgage rates at the start of the current week. The market now anticipates the Federal Open Market Committee’s upcoming meeting, where the benchmark interest rate is expected to hold steady. Nevertheless, investors and homebuyers remain attentive to comments from Federal Reserve Chair Jerome Powell, whose guidance may influence future rate movements.

Key points on mortgage demand and rates last week:

1. Total mortgage applications dropped by 8.5%.
2. Refinancing requests declined 16%, though still significantly above last year’s level.
3. Purchase loan applications fell slightly by 0.4% week-over-week.
4. The average 30-year fixed mortgage rate rose to 6.24%, highest in three weeks.
5. FHA refinancing increased due to comparatively lower rates.
6. The average loan size stayed at a record high since September 2025.
7. Upcoming Federal Reserve decisions are expected to affect mortgage market dynamics.

The recent rise in mortgage interest rates signals caution for borrowers considering financing or refinancing. Markets are closely watching monetary policy developments, which could either ease or further tighten borrowing costs. As home prices remain elevated and loan sizes grow, the interplay between interest rates and demand will continue to shape the housing market’s near-term trajectory.