Mortgage Applications Fall as Elevated Rates Discourage Late-Summer Buyers

Mortgage applications declined this week as interest rates ticked higher, driven by unrest in the Middle East, tariff wars with Canada, and continued concerns over inflation.

For the week ending Aug. 26, MBA's Market Composite Index—a measure of total mortgage loan application volume—fell 1% on a seasonally adjusted basis from one week earlier and is down 5% year over year.

The Purchase Index, deemed a leading indicator for home sales, fell 0.3% week over week on a seasonally adjusted basis, and was down 5% from a year earlier. Refinance activity decreased 2% on the week and was down 17% annually.

Joel Kan, MBA's vice president and deputy chief economist, attributed the downward shift to rising interest rates.

"Purchase activity was down over the week, driven by a 7% decrease in FHA applications. The purchase market has also slowed these past two months, with applications now 5% behind last year’s pace," said Kan.

The increase in mortgage rates also slowed refinancing activity.

"Refinance applications decreased, particularly for FHA and VA loans, and the average loan size for refinances was at its lowest since June 2025," said Kan.

The 30-year-fixed-rate mortgage rate rose to 6.78% from 6.77% the prior week, according to MBA's measure.

Meanwhile, Freddie Mac reports 30-year fixed mortgage rates decreased to 6.65% for the week ending Aug. 20, down slightly from last week's high of 6.67%, but up from this time last year, when rates were 6.58%. The 15-year fixed mortgage rate was 5.95%, down from last week when it averaged 5.96% but up from a year ago when it averaged 5.69%.

Unsurprisingly, high interest rates are dampening buyer demand. Pending home sales fell 2.3% in July from the prior month and are down 2.2% year over year, the National Association of Realtors reported last week.

“The highest mortgage rates of the year hit right in the middle of summer, and that's pulling back contract signings,” said National Association of Realtors Chief Economist Lawrence Yun. “Home prices are at record highs so houses for sale are sitting on the market longer, and fewer buyers are bidding above the asking price than a year ago, though there are large local market variations.”

How mortgage rates are calculated

Mortgage rates are calculated based on various factors in the economy, and the length of your loan and credit score will also factor into the mortgage rate you qualify for.

The 30-year mortgage rate is tied to the yield of the 10-year Treasury note, because most 30-year mortgages are either paid off or refinanced in roughly eight to 11 years.

That makes the duration on the loans roughly comparable, and mortgage lenders use the 10-year Treasury as a benchmark for setting rates, adding on a risk premium.

Long-term yields for Treasury notes are determined by a number of factors, including the supply of and demand for U.S. government debt, and investor expectations for inflation over the life of the bonds.