Mortgage rates hit highest level since August as purchase demand slips

Mortgage rates rose last week to the highest level since August 2025, putting fresh pressure on buyers already stretched by home prices. For everyday investors watching housing, the move matters because higher borrowing costs can slow home sales, weigh on affordability and affect businesses tied to real estate demand.

Total mortgage application volume fell 2.7% from the prior week, according to the Mortgage Bankers Association’s seasonally adjusted index. The average contract rate for a 30-year fixed mortgage with a conforming loan balance of $832,750 or less rose to 6.65% from 6.58%, the MBA said.

A contract rate is the interest rate agreed to on the loan. The MBA also tracks points, which are upfront fees included in mortgage pricing. For borrowers making a 20% down payment, points rose to 0.67 from 0.64, including the origination fee.

The biggest pullback came from buyers. Applications for mortgages to purchase homes dropped 7% from the previous week and were 2% below the same week a year earlier, according to the MBA. Buyers are still facing elevated home prices and a limited supply of lower-cost homes for sale.

Refinancing moved the other way. Applications to refinance an existing mortgage rose 4% for the week and were 7% higher than the same week last year, the MBA said. Refinancing means replacing an existing home loan with a new one, usually to get a different rate, change the loan term or pull out equity as cash.

The year-over-year comparison does not point to a broad refinancing boom. Mortgage rates were only 17 basis points higher a year ago, according to the report. A basis point is one-hundredth of a percentage point, so that gap equals 0.17 percentage point. With rates close to last year’s level, many borrowers have little rate-based reason to refinance.

The refinance share of all mortgage applications rose to 43.2% from 40.6% the previous week, according to the MBA. CNBC reported that the percentage gains likely reflect a small refinancing base and some cash-out refinancing by homeowners using increased home equity.

“Despite higher mortgage rates, refinance applications increased, led by FHA and VA refinance applications rising 9 and 10 percent, respectively,” Joel Kan, the MBA’s vice president and deputy chief economist, said in a release.

Mortgage rates moved higher again at the start of this week, according to a separate survey from Mortgage News Daily. Matthew Graham, the firm’s chief operating officer, wrote that the recent jump was driven by higher fuel prices in July and by the fact that rates had already stayed above 6.52% over the prior two months.

Rates eased somewhat Tuesday after an inflation reading came in much lower than expected, according to Mortgage News Daily. Inflation matters for mortgage rates because lenders and bond investors tend to demand higher yields when they expect prices to rise faster.

This story draws on original reporting from CNBC.