Homebuyers Pausing Purchases as Rates Continue to Climb

Homebuyers and owners looking to refinance pushed the pause button again this week as rates soared over 7%, a move economists attribute to ongoing economic uncertainty and geopolitical forces, namely the continuing conflict in the Middle East.

The latest Market Composite Index from the Mortgage Bankers Association (MBA)—its measure of mortgage loan activity volume and includes purchases and refinances—shows mortgage application activity declining 4.1% on a seasonally adjusted basis after last week’s 2.7% decrease. On an unadjusted basis, the Index decreased 15% compared with the previous week.

Freddie Mac’s most recent Primary Mortgage Survey, released Sept. 10 showed mortgage rates hitting a 14-month high at 6.76%, however rates have continued to rise, currently sitting at 7.19% at presstime, according to Mortgage News Daily. Freddie Mac’s next survey is due out tomorrow.

“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, MBA’s VP and deputy chief economist. “As the 10-year Treasury inched closer to the 5 percent mark, mortgage rates followed and were almost 7 percent. The 30-year fixed rate at 6.97 percent was at its highest level since May 2025. 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.”

MBA’s Refinance Index saw a 9% decrease from a 6% decrease the previous week and was a notable 65% lower than the same week one year ago. MBA’s seasonally adjusted Purchase Index–its weekly measurement of nationwide home loan applications based on a sample of about 75% of U.S. mortgage activity–decreased 1% from one week earlier. The unadjusted Purchase Index decreased 13% compared with the previous week and was 19% lower than the same week one year ago, according to the report.

The refinance share of mortgage activity decreased to 39.4% from 40.9% the previous week, MBA reported. The adjustable-rate mortgage (ARM) share of activity decreased to 8.4% of total applications
Kan added: “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.”

For government-backed loans, this week’s report showed the FHA share of total applications decreased to 16.9% from 17.2% the week prior. The VA share of total applications increased to 12.4% from 12.0% the week prior, and the USDA share of total applications decreased to 0.4% from 0.5% the week prior.

Today’s highly expected 25-basis-point interest rate hike by the Federal Reserve could add some upward pressure to mortgage rates but likely not in the short-term. Mortgage rates are tied to the 10-year Treasury yield, not the Fed’s benchmark rate, and financial markets typically account for these increases ahead of their announcements. In the meantime, economists say home shoppers can expect rates to remain at or above 7% for some time, doing no favors to an already-stressed housing market.

“The rate hike all but guarantees that mortgage rates will remain stuck at or above the 7% threshold, which creates a psychological and financial barrier that will sharply squeeze affordability and sideline even more prospective buyers,” said Bright MLS Chief Economist Lisa Sturtevant, following today’s announcement by the Fed.

To view the full report, click here.