Mortgage rates hit highest level in 3 weeks, weakening demand further

• The average 30-year fixed mortgage rate increased to 6.78% from 6.77%, with refinance applications falling 2% week-over-week and down 17% from a year ago when rates were only 9 basis points lower
• Purchase applications decreased 0.3% for the week and were 5% lower year-over-year, with FHA applications particularly weak at down 7% over the week
• The average refinance loan size hit its lowest level since June 2025, while the purchase market has shown notable slowdown over the past two months

Summary: Mortgage Rates Rise, Dampening Housing Demand

Key Developments:

Mortgage rates reached their highest level in three weeks, with 30-year fixed-rate mortgages for conforming loans (up to $832,750) climbing to 6.78% from 6.77% the previous week. Points also increased to 0.66 from 0.65 for loans with 20% down payments.

Market Impact:

Total mortgage application volume declined 1% week-over-week, according to the Mortgage Bankers Association's seasonally adjusted index. The impact varied by loan type:

• Refinance applications fell 2% for the week and were down 17% year-over-year (when rates were 9 basis points lower)
• Purchase applications dropped 0.3% weekly and were 5% lower than the same period last year
• FHA and VA refinance loans saw particularly steep declines
• FHA purchase applications decreased 7%

Additional Data Points:

The average refinance loan size hit its lowest level since June 2025. Joel Kan, MBA's vice president and deputy chief economist, noted the purchase market has slowed over the past two months.

Outlook:

Recent developments suggest potential relief ahead. Mortgage rates declined earlier this week, driven by falling oil prices following reported progress in peace negotiations via Pakistani mediators. Lower oil prices triggered drops in bond yields, which correlate with mortgage rates.

Despite higher rates compared to last year, reduced overall market competition is making sellers more willing to accept financed buyers, according to Realtor.com data.

Sector: Residential real estate, mortgage lending

Source: Mortgage Bankers Association, Mortgage News Daily