Mortgage Applications Decline as Higher Interest Rates Strain Affordability

Mortgage applications declined this past week, according to new data from the Mortgage Bankers Association, as inflationary fears and continued anxiety over a prolonged Iran war have kept mortgage rates elevated.

For the week ending Aug. 14, MBA's Market Composite Index—a measure of total mortgage loan application volume—fell 0.4% on a seasonally adjusted basis from one week earlier.

The Purchase Index, deemed a leading indicator for home sales, fell 2% week over week on a seasonally adjusted basis, and was down 3% from a year earlier. Refinance activity gained 2% on the week but was down 18% annually.

“Purchase applications decreased and were also lower than last year’s pace," says MBA Deputy Economist Joel Kan. "In addition to the economic uncertainty, affordability difficulties have reemerged as a reason for homebuyers to delay purchase decisions given the impact of higher mortgage rates on monthly mortgage payment.”

Kan notes that borrowers with larger loan sizes remain less likely to refinance with rates hovering near their highest levels of the year.

"The average loan size on refinances continues to shrink, dipping to $282,200 last week, the lowest level since June 2025," the economist said.

Other leading indicators also show a slowdown in homebuyer 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 Tuesday.

The average interest rate for a 30-year fixed-rate mortgage remained at 6.77% last week, unchanged from last week, according to MBA's reading.

Meanwhile, Freddie Mac reports rates remained relatively stable at 6.67% for the week ending Aug. 13, down slightly from last week's high of 6.67%, but up from this time last year, when rates were 6.58%.

MBA says the refinance share of mortgage activity increased to 41.9% of total applications—up from 40.7% last week—while the adjustable-rate mortgage share of activity decreased to 7.7% from 7.9% the previous week.

The FHA share of total applications decreased to 17.1%, down from 17.3% the week prior. The VA share of total applications increased from 12.3% to 12.6% this week, and the USDA share of total applications remained unchanged at 0.5%.

To offset concern over rising rates, Lawrence Yun, NAR's chief economist, suggested that some buyers may want to look at shorter-term mortgages.

“Some may want to consider shorter-term mortgage rates, like seven-year [adjustable-rate mortgages], which lock in fixed mortgage payments for the first seven years of the loan before readjusting,” he told CNBC this week. “These shorter-duration loans are ideal for those who are more certain they will move to another home within that seven-year timeframe.”

The MBA reported the average interest rate for a 15-year fixed-rate mortgage decreased to 6.08% from 6.10% week over week.

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.