Mortgage applications fall as rates hit 6.85%
Mortgage applications dropped 2.7% last week as the average 30-year fixed rate rose to 6.85%, the highest since June 2025, according to the Mortgage
Mortgage applications fell by 2.7% last week. The drop came as the average interest rate for a 30-year fixed mortgage climbed to 6.85%, its highest point since June 2025, according to the Mortgage Bankers Association (MBA).
Joel Kan, the MBA's vice president and deputy chief economist, said investor worries about inflation and the federal budget deficit pushed rates higher. He noted the current rate is 36 basis points above where it was a year ago.
Application breakdown
Refinance activity was hit hardest. The refinance index fell 6% from the previous week and is now 25% lower than the same week last year. As a result, the refinance share of all mortgage activity slipped to 40.9%, down from 41.8% the week before.
Purchase applications showed more resilience but still declined. The seasonally adjusted purchase index dipped 0.2% week-over-week. On an unadjusted basis, purchase applications fell 3% from the previous week, though they remain 4% higher than the same period in 2024.
Kan said purchase applications were largely unchanged overall. He pointed out that higher rates continue to pressure potential buyers, even as more homes become available in many markets.
Shifting loan preferences
With rates rising, more borrowers are considering adjustable-rate mortgages (ARMs). The ARM share of applications reached 8.5% last week, its highest level since June. This shift indicates some buyers are seeking lower initial payments despite future uncertainty.
Government-backed loan shares also shifted. The Federal Housing Administration (FHA) share of total applications rose to 17.2%, up from 15.9%. Conversely, the U.S. Department of Veterans Affairs (VA) share fell to 12% from 13.6%. The U.S. Department of Agriculture (USDA) share held steady at 0.5%.
Detailed rate movements
The MBA's survey provided specific average contract interest rates for various loan types for the week ending September 4.
| Loan Type | Average Contract Rate | Weekly Change |
|---|---|---|
| 30-year fixed (conforming) | 6.85% | +6 bps |
| 30-year fixed (jumbo) | 6.74% | -2 bps |
| 30-year fixed (FHA-backed) | 6.53% | +4 bps |
| 15-year fixed | 6.17% | +3 bps |
| 5/1 ARM | 5.82% | -12 bps |
A separate measure of buyer interest
Data from Xactus, a verification platform, offered a slightly different perspective. Its Mortgage Intent Index, which tracks credit-pull activity, edged up 1.4% week-over-week to a reading of 117.9.
Thomas Lloyd, Xactus's chief strategy officer, said the index rose even with raise fixed rates. He cautioned that the index is still operating near its lowest non-holiday levels of the year. Compared to the same week last year, the index is up about 1.3%, but Lloyd noted that last year's figure included the Labor Day holiday, making the comparison less meaningful.
Kan summarized the overall sentiment, stating, "Refinance applications remain significantly impacted by these higher rates, falling to the slowest weekly pace since May 2025."
