As borrowing costs soar to the highest level since May 2025, demand for home purchases and refinancing in the United States have weakened simultaneously. The rapidly rising mortgage rates are prompting both potential homebuyers and homeowners seeking refinancing to step back and observe.
According to a report released by the Mortgage Bankers Association (MBA) on September 15th, mortgage applications for purchasing new homes decreased by 6% in August compared to July and dropped by 5.5% from the same period last year, reaching the lowest level so far in 2026. In the week of September 11th, seasonally adjusted mortgage applications declined by 4.1%.
The Mortgage Bankers Association’s Purchase Index, which measures mortgage applications for buying single-family homes, dropped by 1% after seasonal adjustments compared to the previous week. Unadjusted data showed a 13% decrease in the Purchase Index compared to the previous week and a 19% drop from the same period last year.
Refinancing activity has also seen a downturn. The Mortgage Bankers Association’s Refinance Index decreased by 9% from the previous week and plunged by 65% from the level seen a year ago.
The share of loan applications guaranteed by the Federal Housing Administration (FHA) dipped from 17.2% in the previous week to 16.9%, while applications secured by the Department of Veterans Affairs (DVA) edged up slightly from 12% to 12.4%.
At the same time, the average contract interest rate for 30-year fixed-rate mortgages surged from 6.85% to 6.97%, marking the highest level since May 2025.
Another separate survey by Freddie Mac revealed that for the week ending September 10th, the average weekly interest rate for 30-year fixed-rate mortgages stood at 6.76%, higher than the previous week’s 6.71% and last year’s 6.35%.
However, daily data indicates that rates have already climbed above 7%. According to Mortgage News Daily, the average rate for 30-year fixed-rate mortgages reached 7.07% on September 10th and further increased to 7.12% on September 11th.
Data from the National Association of Realtors (NAR) shows that existing home sales declined by 2% in August compared to the previous month and decreased by 1.2% from the same period last year.
Nevertheless, the median sales price for existing homes rose by 1.6% from the previous year to $429,100 in August, setting a record high for the month of August.
Joel Kan, Vice President and Deputy Chief Economist at the Mortgage Bankers Association, stated, “Worries about soaring energy prices, persistent high inflation, and the future direction of monetary policy have driven up bond yields and mortgage rates simultaneously last week.”
Kan added, “The current rate environment has significantly reduced the benefits borrowers were obtaining through refinancing, leading to declines in refinance applications across conventional loans, FHA loans, and VA loans.”
Mortgage rates often closely correlate with long-term government bond yields, especially the 10-year U.S. Treasury bonds.
The benchmark U.S. Treasury bond yield topped 5% on September 14th for the first time since 2007 (briefly touched in 2023) before edging back below that threshold.
The latest mortgage application data further confirms what other indicators have been showing: high borrowing costs are putting pressure on real estate market activity.