Mortgage Applications for Refinancing Drop 18% as Interest Rates Rise

Mortgage refinancing activity pulled back sharply this week, as higher interest rates put a damper on refi originations.

The Mortgage Bankers Association's refinance index dropped 18% for the week ending May 22, compared to a week earlier. The group estimates that average 30-year fixed mortgage rates rose to 6.65% for the same period, up from 6.56% a week earlier.

“The 30-year fixed rate has increased 30 basis points over the past five weeks to its highest level since August 2025," says Joel Kan, MBA’s vice president and deputy chief economist. "With the rate now at 6.65%, many borrowers understandably backed away from refinancing last week."

Still, refinance applications were up 19% from a year ago, when mortgage rates were even higher.

Purchase applications to buy a home were barely changed from the prior week, dropping just 0.4%; however, purchase activity was up 5% from a year earlier.

“Purchase applications were slightly lower across all loan types but still ran at a stronger pace than last year’s pace," says Kan. "The average loan size for a purchase application reached another survey high at $473,600, as borrowers with smaller loan sizes were less active given the higher rate environment and its negative impact on their purchasing power."

The new data is the latest sign that higher mortgage rates are slowing a housing market that had appeared to be poised for the strongest sales activity in years, as softening prices and rising inventory gave buyers more power this spring.

Mortgage rates fell to a three-year low in late February, touching 5.98% for one week, according to Freddie Mac. But rates have surged as the Iran war sent oil prices higher, raising fears of inflation and increasing the odds of a Federal Reserve rate hike.

For the week ending May 22, MBA says the refinance share of mortgage activity decreased to 37.5% of total applications, down from 41.9% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 9.4% of total applications.

The FHA share of total applications decreased to 17.2% from 17.9% the week prior. The VA share of total applications decreased to 13.2% from 14.4% the week prior. The USDA share of total applications increased to 0.5% from 0.4% the week prior.

Mortgage rates calculated

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

The 30-year mortgage rate is tied to the yield of the 10-year Treasury note, according to Fannie Mae. As the yield on the 10-year Treasury note moves, mortgage rates follow.

The yield on the 10-year Treasury note is determined by expectations for shorter-term interest rates in the economy over the duration of a bond, plus a term premium.