Mortgage rates rise to highest level in nearly a year, causing homebuyers to pause

Mortgage rates rose last week to the highest level since August 2025, and that caused homebuyer demand for loans to pull back. Refinance demand, however, moved higher.

Total mortgage application volume dropped 2.7% last week compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $832,750 or less, increased to 6.65% from 6.58% last week, with points rising to 0.67 from 0.64, including the origination fee, for loans with a 20% down payment.

Applications for a mortgage to purchase a home fell 7% from the previous week and were 2% lower than the same week one year ago. Buyers are still contending with high home prices as well as lean supply of affordable homes for sale.

Applications to refinance a home loan increased 4% for the week and were 7% higher than the same week one year ago. Last year, rates were just 17 basis points higher, so there is not a lot of incentive for most borrowers to refinance. The percentage gains are likely because there is such a small pool to begin with, and some borrowers are doing cash-out refinances to take advantage of big gains in home equity.

"Despite higher mortgage rates, refinance applications increased, led by FHA and VA refinance applications rising 9 and 10 percent, respectively," said Joel Kan, vice president and deputy chief economist at the MBA, in a release.

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The refinance share of mortgage activity increased to 43.2% of total applications from 40.6% the previous week.

Mortgage rates jumped higher to start this week, according to a separate survey from Mortgage News Daily.

"The key contributor to the recent spike has been the uptick in fuel prices in July combined with the fact that rates never made it any lower than 6.52% over the past 2 months," wrote Matthew Graham, chief operating officer at Mortgage News Daily. "In other words, we were already in a high range and the uptick in fuel prices simply gave rates a push."

Rates then recovered a little bit Tuesday after a read on inflation came in much lower than expected.

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