Mortgage Applications Plunge as Rates Rise and Fed Prepares To Hike

Mortgage applications fell this past week as concerns over inflation and an expected Federal Reserve interest rate hike put a chill on the market, according to the Mortgage Bankers Association.

For the week ending Sept. 11, MBA's Market Composite Index—a measure of total mortgage loan application volume—fell 4.1% on a seasonally adjusted basis from one week earlier.

The seasonally adjusted Purchase Index, which measures the volume of mortgage applications to purchase a single-family home, decreased 1% from one week earlier. Purchase applications were down a staggering 19% from a year ago.

Mortgage applications have been on a steady downward trajectory for months as interest rates climbed toward 7%. Bond market turmoil is driving rates higher, as investors eye inflation data and await the Fed's next move.

Many believe Fed Chairman Kevin Warsh and the rest of the Federal Open Market Committee will raise the Fed's benchmark interest rate by a quarter point to stabilize prices and slow inflation.

If this happens, it would be the first rate hike since 2023, and it would put Warsh at odds with President Donald Trump. Trump has repeatedly argued that interest rates should be lowered. On Sunday, while attending the Irish Open golf tournament, Trump said, "The United States is so strong, we should be paying the lowest interest rate in the world."

"Whether a Fed rate hike comes in September or not, the pressure on mortgage rates is here already and doesn’t show signs of relenting," Realtor.com® Chief Economist Danielle Hale previously said.

“Ongoing market concerns over spiking energy prices, persistently high inflation, and future monetary policy pushed bond yields and mortgage rates higher last week," said Joel Kan, CMB, MBA’s vice president and deputy chief economist.

Last week, the 30-year fixed rate was 6.97%, its highest level since May 2025, according to MBA calculations. Freddie Mac pegged the average rate at 6.76% last week.

"After adjusting for the Labor Day holiday, purchase applications dipped relative to the week prior as higher mortgage rates caused many buyers to pause their purchase decisions," Kan said. "The current level of rates also eliminated much of the benefit to refinance for many borrowers, resulting in declines in conventional, FHA, and VA refinance applications.”

Applications to refinance a home loan dropped 9% week over week and were down 65% from the same week one year ago. 

FHA share of applications also fell from 17.2% to 16.9% week over week, while the VA share of total applications rose slightly to 12.4% from 12% the prior week. The USDA share of total applications fell to 0.4% from 0.5% the prior 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.