Last week, U.S. mortgage rates rose to their highest level in nearly three years, causing a continued significant and steady decline in the demand for refinancing and home purchase mortgages.

The seasonally adjusted index from the Mortgage Bankers Association of America ( Mortgage Bankers Association , MBA ) shows that the total number of mortgage applications decreased by 4.2% compared to the previous week.

For 30-year fixed-rate mortgage loans that meet the loan balance criteria (loan balance not exceeding $832,750), the average contract interest rate rose from 7.30% to 7.49% last week; with a 20% down payment, including issuance fees, the point rate increased from 0.75 to 0.84.

Mortgage refinancing applications, which are highly sensitive to interest rates, decreased by 8% in the week, which is 56% lower than the same period last year. As interest rates rise each week, the pool of borrowers eligible for refinancing is also narrowing.

"At such interest rate levels, few homeowners have the incentive to refinance," said economist Joel Kan from MBA. "Since interest rates are about one percentage point higher than a year ago, the number of refinancing applications last week dropped to the lowest level since 2025 and is also less than half of what it was during the same period last year."

Mortgage applications for home purchases decreased by 2% in the week, 15% lower than the same period last year.

Kan added, "Home purchase activities for various types of loans are all on the decline, with FHA mortgage applications seeing the largest decrease, by 6%. This is because these higher interest rates have exacerbated the affordability (affordability) challenges that many homebuyers are continuously facing. As has been pointed out in recent weeks, an increasing number of borrowers are opting for adjustable-rate mortgages (ARM) to reduce their initial monthly payments, and last week, the proportion of these ARM stabilized at 10.3%."

The initial interest rate for adjustable-rate mortgages is relatively low, but after the fixed period ends, the interest rate may fluctuate upwards or downwards, which is considered to carry a higher risk. In contrast, during the first few years of the pandemic when fixed mortgage rates reached record lows, the application proportion for ARM was less than 3%.

Another survey by Mortgage News Daily shows that mortgage rates have fallen slightly this week. Although the rates are still close to their highest levels since 2003, the rates offered by average lending institutions have dropped to their lowest point in over a week, at 7.56%.

Mortgage News Daily Chief Operating Officer Matthew Graham wrote: "What is going on here? Does this mean that the recent upward momentum is starting to weaken? It's still too early to draw conclusions, but encouragingly, the long-term high point on Monday is roughly consistent with the high point seen on September 30th. This kind of 'double top' pattern is a signal that some analysts pay attention to when trying to identify changes in momentum."