Mortgage Rates Climb to Year-High, Dampening Home-Purchase Demand but Boosting Refinances

Last week mortgage rates rose to 6.65% for a 30-year fixed-rate loan with a conforming balance of $832,750 or less—the highest level since August 2025. The increase prompted a 2.7% drop in total mortgage-application volume, according to the Mortgage Bankers Association’s (MBA) seasonally adjusted index. Purchase-loan applications fell 7% from the prior week and remain 2% below the same week a year earlier, while refinance applications rose 4% and are 7% higher than a year ago.

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• Average contract rate: 6.65% (up from 6.58% the previous week).

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• Points on a 20% down payment loan: 0.67 (up from 0.64).

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• Purchase-loan applications: –7% week-over-week; –2% year-over-year.

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• Refinance applications: +4% week-over-week; +7% year-over-year.

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• FHA refinance growth: +9%; VA refinance growth: +10%.

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The MBA released the data, noting that despite higher rates, refinance activity continued to climb, driven largely by government-backed loan programs. Joel Kan, vice president and deputy chief economist at the MBA, highlighted the contrast between weakening purchase demand and strengthening refinance interest, attributing the latter to a limited pool of borrowers seeking cash-out refinances to capture recent home-equity gains.

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“Despite higher mortgage rates, refinance applications increased, led by FHA and VA refinance applications rising 9 and 10 percent, respectively.” — Joel Kan, vice president and deputy chief economist, Mortgage Bankers Association

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Higher rates are suppressing new-home demand, especially as buyers contend with elevated prices and scarce affordable inventory. At the same time, the modest rise in refinance activity suggests that borrowers with substantial equity are still motivated to tap that value, even as overall incentive to refinance wanes. The divergent trends signal a market where price-sensitive purchasers retreat while equity-rich owners pursue cash-out opportunities, shaping the near-term dynamics of the U.S. housing finance sector.

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